Two lawsuits from Facebook shareholders came to light this week with charges over an alleged fine paid by Facebook to the FTC (Federal Trade Commission), the main antitrust and regulator in the US. According to the allegations, members of the social network’s board approved a deal to get the company to pay $4.9 billion more in a $5 billion fine, aimed at protecting CEO Mark Zuckerberg from the Cambridge Analytica scandal. .
Both lawsuits were filed by shareholder groups in 2020. Last month, they were attached to a complaint filed in the Delaware State Chancery Court.
In 2018, the Cambridge Analytica scandal became known to the world. Facebook was the target of a “data leak” that reached 87 million people globally, through a breach in terms of the social network that allowed the sharing not only of users, but also connections within the network, such as friends or relatives . The following year, Facebook was fined $5 billion by the FTC for “misleading” its users about data protection.
Facebook protected Zuckerberg, shareholders say
But according to the lawsuits, Facebook deliberately did not stop Cambridge Analytica from violating users’ privacy. The company did this to favor an “illegal” business model, according to shareholders.
According to what was documented in the first lawsuit (PDF), there was an agreement with company executives to shield Mark Zuckerberg during the Cambridge Analytica scandal. Before imposing the fine, the agency sent a letter to the company in which it named Zuckerberg as the defendant in the investigations.
To come to terms with the FTC and prevent the CEO from testifying as an investigated, Facebook’s directors took action. They authorized the company to pay more than the stipulated amount, which was around $100 million. In the end, the $5 billion fine reflected the leak of every single profile, but it was “$4.9 billion higher than Facebook’s bylaws.”
Also in the first process, it appears that a series of board members of the social network, such as investors Marc Andreessen and Peter Thiel, the executive director of Facebook Operations, Sheryl Sandberg and CTO Mike Schroepfer — who are leaving the company and he will be replaced by Andrew Bosworth, vice president of Facebook Reality Labs — they took advantage of inside information to trade the company’s shares on the stock exchange, a crime known as insider trading In the USA. Mark Zuckerberg himself would also be involved in the scheme.
Facebook didn’t stop Cambridge Analytica
In the second case, this accusation of insider trading worsens: shareholders claim that these same executives sold more shares of Facebook between June 26, 2013 and July 23, 2019, the day before the FTC fine was applied to the social network.
The next day, as a result of the punishment, Facebook shares on the US NASDAQ stock exchange dropped more than 1%. But it recovered on the same day, starting to be worth US$ 204.66, against US$ 199.94 at the opening of the stock exchange.
The shareholders demand compensation for damages and are seeking an agreement between all parties involved. They accuse Zuckerberg and the other executives on the company’s board (Thiel, Sandberg and Andreessen) of violating the California Irregular Competition Act.
The lawsuit demands the return of money that was earned through what it calls “profit through the illegal sale of shares due to privileged information and confidential information of Facebook”.
Also included in the second case is the allegation that Facebook did nothing to prevent Cambridge Analytica from obtaining data from its users. Here’s what the shareholders say in the document:
“Cambridge Analytica’s use of users’ personal information was a natural consequence of Facebook’s business strategy. It is based on people’s open sharing of information, in the spirit of ‘full reciprocity’, and agreements with the Application Platform program partners. This does not depend on consumer consent and violates the FTC’s Consent Act, passed in 2012. Facebook did nothing to verify how sensitive user information was being used by partners who had access to the platform.”
Documents reveal privileged treatment, he says WSJ
The disclosure of the lawsuits comes at a bad time for Facebook. The company is in the midst of a new scandal: documents revealed by an investigation by the Wall Street Journal indicate that the social network has an internal VIP system.
According to the vehicle, Facebook has a program called “cross check” or “XCheck” that applies special platform rules for a “secret elite”. Ordinary people receive standard treatment, while this prominent elite is exempt from punishment under the platform’s rules.
This week, Facebook’s Vice President of Global Affairs Nick Clegg defended the company’s articles from Wall Street Journal:
“The articles published by the WSJ contains a mischaracterization of what we’re trying to do, and has given notoriously false motives to Facebook’s leadership and its employees.”
Facebook’s Oversight Committee has opened an investigation to determine if there is a list of privileged accounts for the social network, as well as to verify the existence of a “cross check” program. In a statement released on Tuesday, the Committee stated that “it is essential that social media platforms are transparent.”
With information: The Register