A Facebook Inc. investor filed a proposed securities class action Wednesday, alleging the social media behemoth purposely misrepresented its enforcement of speech policies, user growth and other metrics. This comes weeks after a former Facebook employee and whistleblower came forward with similar allegations.
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Investor Wee Ann Ngian highlighted recent accusations from former FB product manager and whistleblower Frances Haugen that Facebook gave preferential treatment to high-profile users, among other questionable practices. Haugen’s allegations and other news reports released in recent months caused the company’s share prices to drop more than 14% according to Ngian’s suit.
“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages,” Ngian alleged.
The suit alleges multiple violations of the Exchange Act and seeks to represent a class of anyone who purchased Facebook securities from Nov. 3, 2016, through Oct. 4, 2021. The suit also names Facebook CEO Mark Zuckerberg and David M. Wehner, the company’s chief financial officer, as defendants.
A Wall Street Journal article released Sept. 13 outlining how the company’s quality control program known as “cross check” or “XCheck” purportedly safeguards the accounts of politicians, journalists and celebrities from the company’s normal enforcement process. That day alone, Facebook shares fell $5.17 to close at $376.51, according to the suit. This article was the first of nine WSJ would published on documents provided by Haugen.
Another article on Sept. 28 detailed the company’s purported efforts to attract preteens, and pushed Facebook’s share prices down by $7.32. Ngian pointed to a July 2018 statement from the company stating it does not allow those under 13 to have Facebook accounts.
The suit also references a 60 Minutes interview with Haugen as well as a CBS News article containing 8 whistleblower complaints filed with the SEC against Facebook.
The SEC complaints included a gamut of allegations against the company, including that FB knew of the spread of misinformation on its platforms, but did almost nothing to stop it.
Those complaints also accuse the company of misleading investors about the extent to which Facebook was used “to foment ethnic violence and global division,” Ngian alleged. Another accusation in the SEC complaints accuses the social giant of inflating its advertising reach and user base in key demographics.
Ngian claimed Facebook share prices fell $55.45 between Sept. 13 to Oct. 4. According to Wednesday’s complaint, if Ngian and the proposed class knew Facebook’s securities prices were artificially inflated, they would never have purchased the securities at those prices, or at all.
Ngian and the rest of the proposed class are seeking damages, pre- and post-judgment interest, attorney’s fees and costs.
The suit comes as Mark Zuckerberg announced Thursday that Facebook is rebranding the company name to Meta, with its apps including Facebook, Instagram and WhatsApp operating underneath.
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Source: https://www.law360.com/articles/1435268/facebook-hit-with-investor-suit-over-whistleblower-claims
