A civil complaint filed in the Eastern District of New York on Wednesday claims Facebook Inc., CEO Mark Zuckerberg, and CFO David M. Wehner misled investors by failing to disclose facts adverse to the company’s business, operations, and financial results in violation of the Securities Exchange Act of 1934. The shareholder largely points to a series of widely-publicized recent revelations by Facebook whistleblower Frances Haugen and publications by The Wall Street Journal unveiling news that the plaintiff claims cumulatively caused a 14% share price drop.
The complaint first accuses the largest online social network of falsely inflating its monthly active user (MAU) figures as early as November 2016. The filing points to disclaimers made in several SEC quarterly and yearly filings, and explains that the number of duplicate user accounts was not detailed enough or accurately reflected in those official submissions.
The complaint also blames Facebook for failing to provide a “fair platform for speech, and regularly protect[ing] high profile users via its Cross Check/XCheck system,” contrary to its public assertions. The shareholder cites internal documents unearthed in the recent whistleblower and news media exposé that showed the purported unevenness of Facebook’s fact-checking.
In addition, the stockholder alleges that the company failed to respond to threats around the globe like those posed by drug cartels, human traffickers, and violent organizations that used the platform to foment harm. The complaint reprints documents stating that “[i]n Myanmar, where violence against the Rohingya ‘bears the hallmarks of genocide,’ a Facebook commissioned human rights report showed the company ‘created an enabling environment.’ In Ethiopia, Facebook’s platform amplified ethnic tensions and calls for genocide, inciting violence.”
Finally, the complaint takes aim at Facebook’s efforts to attract preteens and teens to its platforms. The company lied to the public about the intentions to lasso the untapped user base, the complaint says. The shareholder references internal documents that, for example, evince the existence of an in-depth, multi-year internal study used to better understand the demographic.
The filing claims that the defendants made false and misleading statements knowingly or with reckless disregard for their truth. The lawsuit seeks to certify a class of shareholders who purchased Facebook shares between Nov. 3, 2016 and Oct. 4, 2021. The plaintiff is represented by The Rosen Law Firm.