Facebook shareholders sue as share price tumbles in wake of Cambridge Analytica scandal

Investors allege company misled them by failing to disclose that it had allowed third parties to access millions of users' profile data

Ben Chapman
Wednesday 21 March 2018 17:29 GMT
Shares have crashed by 11 per cent, wiping more than $57bn (£41bn) off the company’s value
Shares have crashed by 11 per cent, wiping more than $57bn (£41bn) off the company’s value (PA)

Facebook is being sued by US investors over the company’s tumbling share price after allegations that millions of users’ profile data had been harvested.

A class-action lawsuit was filed in federal court in San Francisco on Tuesday after Facebook shares fell as much as 5.2 per cent on Monday. By Wednesday the shares had crashed by 11 per cent, wiping more than $57bn (£41bn) off the company’s value as it deals with the erupting privacy scandal.

The undisclosed number of Facebook shareholders, led by Fan Yuan, say that they suffered losses after a whistleblower told The Observer that UK-based data company Cambridge Analytica had harvested and improperly used profile data of 50 million Facebook users.

“As a result of [Facebook’s] wrongful acts and omissions, and the precipitous decline in the market value of the company's common shares, plaintiff and other class members have suffered significant losses and damages,” the lawsuit said.

The legal action represents investors who bought Facebook shares between 3 February 2017 and 19 March 2018 - two days after news of the Cambridge Analytica scandal broke.

It alleges that throughout the period, Facebook made “materially false and misleading statements regarding the company’s business, operational and compliance policies”.

Specifically, it alleges that Facebook failed to disclose to investors that it had violated its own data privacy policies by allowing third parties to access the personal data of millions of users without the users’ consent.

“Discovery of the foregoing conduct would foreseeably subject the company to heightened regulatory scrutiny; and... as a result, Facebook’s public statements were materially false and misleading at all relevant times,” the lawsuit alleges.

A spokesperson for Facebook was not immediately available for comment. Earlier this week, Facebook’s deputy general counsel said in a statement: “We are committed to vigorously enforcing our policies to protect people’s information.

“We will take whatever steps are required to see that this happens.”

The US Federal Trade Commission (FTC) has also reportedly opened an investigation into Facebook over privacy rules around user data.

The scandal emerged after whistleblower Christopher Wylie alleged that Cambridge Analytica had seized data on millions of Facebook users and that data was then not destroyed as agreed. Mr Wylie, a former research director for the firm, said this data was used to build software that could target voters and influence their political choices.

Cambridge Analytica is perhaps best known for assisting the 2016 presidential campaign of US President Donald Trump. The company is now facing a government search of its London office, questions from US state authorities, and a demand by Facebook that it submit to a forensic audit.

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