"In Suddeth v. Meta Platforms, Inc., Chief Judge Richard Seeborg dismissed a class action brought by licensed investment advisers whose identities scammers had hijacked to promote pump-and-dump schemes in Chinese penny stocks. Fraudsters purchased ad placements through Meta's ad manager, uploaded fabricated endorsements using plaintiffs' names and headshots, and funneled victims into WhatsApp groups where the manipulation continued."
"Plaintiffs argued that Meta's machine-learning systems, which 'maximize reach, engagement, or downstream actions,' made Meta a co-developer of the fraud. Algorithmically amplifying an illegal securities solicitation is itself content development. Seeborg rejected this theory."
"Drawing on Dyroff v. Ultimate Software Group, Inc. and Doe v. Grindr Inc., he held that Meta's targeting tools are 'content neutral on their own.' Algorithmic amplification, he wrote, 'is nothing more than an averment of facilitation.'"
Social media platforms have become primary channels for fraudulent securities offerings, yet Section 230 of the Communications Decency Act has historically protected them from liability. Recent court decisions in California are shifting this landscape, allowing for potential securities fraud claims against these platforms. In Suddeth v. Meta Platforms, Inc., a judge dismissed a class action involving identity theft for fraudulent promotions, ruling that Meta's algorithms do not constitute content development. However, another case denied a Section 230 dismissal, indicating a change in legal accountability for social media companies.
Read at Bloomberglaw
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