Security & Fraud

Facebook Slapped With Shareholder Lawsuit Over Cambridge Analytica Scandal

Facebook’s latest data scandal — in which Cambridge Analytica, the political consulting firm, got access to data on 50 million users — has prompted a class action lawsuit from shareholders as a result.

Citing the lawsuit that was filed in California’s Northern district, Gizmodo reported that Fan Yuan, a Facebook shareholder, filed the suit accusing the social media company of “materially false and/or misleading” claims about how it handles data it collects on users. It pointed specifically to cases where Facebook’s Chief Executive Mark Zuckerberg has talked about privacy and security issues but did not mention the case with Cambridge Analytica. The suit contends the failure to disclose the situation lowered the value of the stock that he and other investors hold in Facebook. The suit is seeking unspecified damages and any other monetary compensation that the court thinks the shareholders deserve. It’s not clear how many investors are part of the suit, noted Gizmodo.

Facebook declined to comment on the lawsuit but pointed to the company’s most recent statement by Facebook general counsel Paul Grewal, who said the company is committed to “vigorously enforcing our policies to protect people’s information. We will take whatever steps are required to see that this happens.”

Facebook’s stock has been plummeting since the start of the week after it revealed the data scandal with Cambridge Analytica. On Monday (March 19) alone it lost nearly $37 billion in market value and continued to decline in Tuesday’s (March 20) trading session.

Cambridge Analytica worked on President Donald Trump’s presidential election and is being blamed for not deleting the data on the 50 million Facebook customers, instead using it to target information at people during the election. That has sparked outcry from lawmakers, privacy groups, Facebook users and investors.  Gizmodo noted that New York and Massachusetts are investigating the incident and have called on Facebook to give up information on Cambridge Analytica. The consulting firm also suspended CEO Alexander Nix after British TV station Channel 4 secretly recorded him speaking about how the firm attempts to entrap politicians.

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