On November 15, Ohio Attorney General Dave Yost announced he filed a lawsuit against Facebook “for misleading the public on how it controlled its proprietary algorithm all in an effort to boost its stock and deceive shareholders.” The lawsuit follows the allegations of Facebook whistleblower Frances Haugen, whose disclosure to the U.S. Securities and Exchange Commission (SEC) followed several other anonymous whistleblower disclosures alleging that the tech giant was committing securities fraud.
Yost filed the lawsuit on behalf of the Ohio Public Employees Retirement System (OPERS) and Facebook investors. The suit alleges that “from April 29 through Oct. 21, 2021 Facebook and its senior executives violated federal securities laws by purposely misleading the public about the negative effects its products have on the health and well-being of children and the steps the company has taken to protect the public.”
These allegations echo those made by Huagen and other Facebook whistleblowers. Since 2017, the Alliance to Counter Crime Online has worked alongside the National Whistleblower Center and whistleblower law firm Kohn, Kohn & Colapinto to assist whistleblowers in filing SEC disclosures outlining allegations against Facebook and other social media companies for their mishandling of illegal content on their platforms. It was attorneys from these organizations who developed the novel legal theory deployed by Haugen in her disclosure. The theory is based upon the argument that Facebook is violating SEC regulations by misleading investors in that it is profiting from illegal activity on its site and putting its shareholders at risk by failing to fully disclose the amount of illegal activity the site hosts and promotes.
“In roughly a month, [Haugen’s] revelations caused a devaluation in Facebook’s stock of $54.08 per share, causing OPERS and other Facebook investors to lose more than $100 billion,” states a press release issued by the Ohio Attorney General. “Yost’s lawsuit not only seeks to recover that lost value but also demands that Facebook make significant reforms to ensure it does not mislead the public about its internal practices.”
The press release further states that “Yost plans to ask the court by Dec. 27, 2021 – the deadline for such motions – to appoint OPERS as the lead plaintiff in his Facebook securities fraud action. He welcomes other Facebook investors to join him in holding the company and its executives accountable.”
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