The fight between a scurrilous website and a libertarian billionaire with a vendetta is at the centre of a dispute about privacy and freedom of speech in the digital age.

The firestorm of debate was sparked when Peter Thiel, the venture capitalist, was stirred into action by Gawker's posting of an illicit sex tape involving a wrestler.

The case has also thrust the media ambitions of the mighty Facebook back into the limelight and raised questions about how some members of Silicon Valley’s technocratic elite wield their newfound power and wealth.

The flashpoint came after Mr Thiel this week confirmed reports that he had secretly financed a successful lawsuit against Gawker to the tune of $10 million. The lawsuit was brought by Terry Bollea, a professional wrestler known as Hulk Hogan, over the video that showed him having sex with a friend's wife.

It led to a $140 million judgment that has been seen as a watershed in resetting the balance in the US between privacy and press freedom – and a potential knockout blow to Gawker, which is appealing.

Mr Thiel, who made his name as the first outside investor in Facebook and is still a director, has never been one to shy away from controversy.

A cerebral contrarian who likes to flaunt his unconventional ideas and disdain for traditional institutional authority, he has sometimes seemed to be bent on an almost perverse pursuit of controversy.

Vendetta

He once held that democracy had never recovered from “the vast increase in welfare beneficiaries and the extension of the franchise to women”.

But even by his standards, the clandestine vendetta against Gawker has been notable.

In an interview with the New York Times, Mr Thiel said he had spent years looking for cases to finance against the media site, which he said "ruined people's lives for no reason". He described the campaign as "one of my greater philanthropic things that I've done".

Mr Thiel's private war dates back nearly a decade, to when Valleywag, a Gawker company site that has since folded, revealed that he was gay. In a statement on Thursday, he said Gawker had "built its business on humiliating people for sport. They routinely relied on an assumption that victims would be too intimidated or disgusted to even attempt redress for clear wrongs."

Antipathy

His comments reflected the antipathy that Valleywag once stirred among parts of the Silicon Valley establishment. Though few financiers or tech figures were prepared to wade into the spreading public debate on Thursday, Vinod Khosla, another prominent venture capitalist, tweeted his support. "click bait journalists need to be taught a lesson", he wrote. "Far less ethics and click chasing in press today. I'm for #theil."

However, the spectre of a massively wealthy individual using the legal system in such a calculated way to bring a media company to its knees was immediately condemned as abusive by some media commentators.

Targeting a media company in this way could become a model for rich people who wanted to silence critics, said Eric Goldman, a professor at Santa Clara University law school, in Silicon Valley. “If you get a determined, vengeful person just waiting for a media organisation to make a mistake, it puts the organisation in an untenable position,” he said.

However, some legal experts defended Mr Thiel’s stalking of

Gawker

as an acceptable use of the third-party financing of lawsuits, which has become a method in the US for bringing cases on behalf of people who otherwise could not afford them.

Rights

“One can imagine abuses, and one can imagine a billionaire funding a whole set of frivolous lawsuits – but there’s no case of that going on here,” said Eugene Kontorovich, a professor at Northwestern Pritzker School of Law. “It isn’t a case of ‘tying them up in litigation’. It’s called exercising legal rights.”

Whatever the ethical issues raised by Mr Thiel’s use of the legal system to floor an enemy, meanwhile, the controversy has drawn unwelcome attention for Facebook. It comes at a time when the social network is trying to overcome fears of its burgeoning power in the media world in an attempt to persuade publishers let it host their content on its site.

Nick Denton, Gawker's founder and a former journalist at the Financial Times, was quick to try to draw a wider issue around his fight with Mr Thiel.

“The world is already uncomfortable with the unaccountable power of the billionaire class, the accumulation of wealth in Silicon Valley, and technology’s influence over the media,” he wrote, in an open letter challenging the venture capitalist to a public debate.

Bias

He also pointed to a story on another of his company’s sites that recently questioned whether Facebook’s in-house editors had been biased against Republicans. The ensuing row led Mark Zuckerberg to issue a denial and summon Republican commentators to a private meeting for reassurance.

It is not the first time that Mr Zuckerberg has had his problems with outspoken directors this year. In February, he denounced comments from Marc Andreessen as “deeply upsetting” after the Silicon Valley financier had criticised India’s rejection of a Facebook plan to bring free internet access to people there.

With Mr Thiel’s attack on Gawker having no direct bearing on Facebook’s own business, Mr Zuckerberg has shown no inclination this week to wade into the latest spat. Yet the sight of Mr Thiel, a close ally of Mr Zuckerberg, stamping on a critical media site has still rankled the company’s critics.

“It seems to me there’s a reasonable question as to how much Facebook believes, beyond platitudes, in freedom of expression and journalism,” said Dan Gillmor, an author and long-term observer of digital media who teaches at Arizona State University.

As long as Mr Thiel remains closely associated with Facebook, those misgivings are guaranteed to persist.

- Copyright The Financial Times Ltd