Facebook lawsuit claims Zuckerberg guilty of insider trading - News Coverage

Facebook lawsuit claims Zuckerberg guilty of insider trading

WILMINGTON, Del. – As Facebook proclaims “The future is private,” numerous lawsuits in Delaware court are scrutinizing its past. 

The latest, filed on Wednesday in Delaware Chancery Court, claims Facebook Chairman and CEO Mark Zuckerberg is liable, along with seven other board members, for a political scandal that erupted last year over the release of users’ personal information to the Trump campaign’s political consultant Cambridge Analytica. 

The lawsuit states Zuckerberg’s “personal liability” extends to an already-announced $3 billion to $5 billion fine to be imposed on his social media company by the Federal Trade Commission. Zuckerberg has an estimated net worth of over $60 billion.

“The allegations … represent one of the worst examples of privacy abuse in the age of social media,” the 193-page civil complaint states.

In a statement, a Facebook spokesperson said the case, brought by shareholder Robert Feuer, is without merit. 

In addition to Zuckerberg, the named defendants are some of Silicon Valley’s most influential.

They include Facebook Chief Operating Officer Sheryl Sandberg; Paypal co-founder Peter Thiel; Netflix co-founder Reed Hastings; Netscape co-founder Marc L. Andreessen; WhatsApp co-founder Jan Koum; Gates Foundation CEO Susan Desmond-Hellmann; and former investment banker Erskine B. Bowles.

Facebook, a company worth $550 billion, collects information that shows the preferences of the billions of people who use its platforms. It analyzes that data to then sell targeted ads.

News reports last year revealed that the social media giant also was allowing other companies access to the trove of user data. It was an apparent violation of a 2011 consent decree signed with the FTC that required Facebook to “obtain express consent before allowing user information to be shared with other applications.”

In particular, Facebook had allowed the U.K.-based Cambridge Analytica to create “psychological profiles” of its users. It then sold those profiles to the presidential campaign of then-candidate Donald Trump, “partially credited with aiding President Trump’s victory in the election,” according to the suit.

More: Facebook cracks down on personality quizzes to protect your personal info

More: Facebook ‘unintentionally uploaded’ 1.5 million users’ email contacts without permission

It further claims that Facebook “embedded” its employee at Trump’s campaign headquarters “to facilitate such personalization.” 

When the public learned about the Cambridge Analytica scandal, Facebook’s value collapsed, losing about $50 billion in two days. The share price has rebounded during the first half of 2019, nearly matching a high reached before the scandal broke. 

Beyond the personal liability of Facebook’s board of directors, the Delaware civil suit also asserts that Zuckerberg, Sandberg, and Koum sold a total of $1.5 billion in Facebook stock prior to the collapse in its price.

That amounts to insider trading, the suit alleges, because the three directors would have known about the coming storm. 

Wednesday’s civil suit, which highlights Delaware’s outsized role as an arbiter of corporate disputes, also adds to what has become a global outrage following last year’s reports about Cambridge Analytica. 

Similar ongoing lawsuits filed in Delaware seek to strip the 34-year-old Zuckerberg of his dual role of CEO and chairman of the world’s most powerful social media company.

The legal fights are occurring in Delaware because Facebook is legally incorporated in the state, as are two-thirds of all Fortune 500 companies. 

Regulators from around the globe also have joined in the backlash as politicians and government officials are wary of the unprecedented influence the social media giant, and Zuckerberg individually, wield over global politics and society.

In December, lawmakers in the United Kingdom made 250 pages of Facebook’s internal emails public, showing how the company for years had aggressively hunted for ways to profit off its massive database of user information.

Democratic president candidate Elizabeth Warren has been calling for federal regulators to force Facebook to break into smaller companies in order to “promote competitive markets.”   

Facebook announced last week that it expects to face up to a $5 billion fine levied by the FTC for privacy violations associated with the Cambridge Analytica scandal. 

 

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