You don't have to break a source's confidentiality, you take the info they have given you and find someone who is willing to confirm on the record.
It might be a 99% certainty that the story is true, but if the stereotype of "lololol Gaemz journalizm sucks!!1!!!1!" is ever going to end, they need to hold themselves to the same standards as the hard news outlets.
I think you have some fundamental misunderstandings here. Let me try to clear a few things up.
1) "Off the record" means that something cannot be used in a story. This was a story that directly quoted eight anonymous people. They were all on the record - they just asked to speak anonymously. There is a big difference.
2) For over a century now, anonymous sources have been an essential part of investigative journalism in every field. Without anonymous sources, there is no investigative journalism. Do you think people would ever risk their lives and careers to help expose crime and corruption and misdoings if they couldn't speak anonymously?
Here's a good example from the most distinguished newspaper in the world. For a story in 2010, the New York Times' David Carr interviewed a ton of current and former employees in order to paint the picture of how Sam Zell
ran the Tribune into the ground. There was no documentation. There were no emails. Just Carr's anonymous sources. And these were far more serious allegations than anything in Kotaku's Silicon Knights story: we're talking sexual harassment, among other things. As a reporter for a paper with ridiculously high standards, Carr edited and reported until he knew he had the truth, and he corroborated the details accordingly.
Guess how the Tribune responded?
Denial.
This is investigative journalism, ladies and gentlemen. This is exactly what people say they want more of in gaming. Every single day, on NeoGAF elsewhere. And now Kotaku is getting backlash because the subject of an unflattering investigative report is denying those unflattering accusations a few days after realizing that his crowdfunding campaign - a campaign that has been sketchy since the beginning - was failing miserably?
I don't know why Wired (or other outlets) turned down this story, but I do know that Stephen and Andrew edited it a great deal - and reported a lot more - during the months after the email in this thread, which was sent in January of 2012. Kotaku's story was published in October of 2012. This story has been in the works for a very long time, and it looked a
lot different in January 2012 than it did when it was published, from what I've seen and heard.
Stephen will inevitably have more to say whenever he posts about this on Kotaku. But it's really, really disappointing to see how some of you have been reacting in this thread. Why would any gaming journalist want to do investigative work when the hardcore gaming crowd will immediately attack them (and - holy shit! - put the word "journalism" in scare-quotes) as soon as the subject of an unflattering report issues a denial? You don't need a journalism degree to understand this stuff.