Several Facebook investors filed lawsuits and proposed a securities class action accusing the social media behemoth of misrepresentations regarding enforcement of its speech policies, its user growth, and other metrics. The lawsuits pointed to recently revealed accusations from whistleblower and former company product manager Frances Haugen. The lawsuits claim that news reports published in September and earlier this month based on Haugen’s allegations sent company share prices sliding more than 14%.
According to the complaints, Facebook made materially false and misleading statements regarding its user growth. Facebook allegedly knew that duplicate accounts represented a more significant portion of its growth than stated. Moreover, the lawsuits purport did not provide a fair platform for speech and regularly protected high-profile users via its “Cross Check” or “XCheck” system. The Company allegedly failed to respond meaningfully to drug cartels, human traffickers, and violent organizations.
U.S. law firm Bernstein Liebhard filed a securities class action lawsuit on behalf of investors who purchased or acquired the securities of Facebook from November 3, 2016, through October 4, 2021. This lawsuit refers to the following media reports in particular (press release):
- On September 13, 2021, during trading hours, The Wall Street Journal (“WSJ”) published an article titled “Facebook Says Its Rules Apply to All. Company Documents Reveal a Secret Elite That’s Exempt.” It would be the first of nine articles published by the WSJ based on documents provided by a then-unknown whistleblower (the “Whistleblower”). On this news, Facebook shares dropped by $5.17 to close at $376.51 on September 13, 2021.
- On September 28, 2021, during market hours, the WSJ published an article titled, “Facebook’s Effort to Attract Preteens Goes Beyond Instagram Kids, Documents Show.” On this news, Facebook share prices dropped $7.32 to close at $340.65 on September 28, 2021.
- On October 3, 2021, CBS News aired a television segment on 60 Minutes interviewing the Whistleblower Frances Haugen, on her findings during her time at Facebook. On October 4, 2021, CBS News published an article titled, “Whistleblower’s SEC Complaint: Facebook Knew Platform Was Used to ‘Promote Human Trafficking and Domestic Servitude‘”, which contained the whistleblower complaints against Facebook filed with the SEC. As a result of the October 3 and 4 revelations, Facebook’s share price dropped $16.78 per share, or approximately 4.9%, from closing at $343.01 on October 1, 2021, the prior trading day, to close at $326.23 on October 4, 2021.
Another lawsuit with similar allegations has been filed by the law firm Laurence M. Rosen and Phillip Kim on behalf of the Facebook investor Wee Ann Ngian (Source: Law360). The case is Wee Ann Ngian v. Facebook Inc. et al., case number 1:21-cv-05976, in the U.S. District Court for the Eastern District of New York.
