Facebook duped investors by misrepresenting its policies regarding “misinformation” and “harmful content,” Ohio Attorney General Dave Yost alleges in a securities fraud lawsuit against the company.
The suit, filed Monday in U.S. District Court in the Northern District of California, largely draws on information provided by former Facebook employee Frances Haugen. She recently provided government officials as well as some reporters with a trove of Facebook's internal documents, including research into the potential harmful effects of Instagram on teen girls.
“This matter arises from an egregious breach of public trust by Facebook, which knowingly exploited its most vulnerable users -- including children throughout the world -- in order to drive corporate profits,” Yost says in the complaint.
He adds that documents provided by Haugen show that Facebook knew its products and systems were “riddled with flaws that sow dissension, facilitate illegal activity and violent extremism, and cause significant harm to users.”
“Despite this knowledge, Facebook opted to maximize its profits at the expense of the safety of its users and the broader public, exposing Facebook to serious reputational, legal, and financial harm,” the complaint alleges.
A Facebook spokesperson says the lawsuit is “without merit” and that the company will defend itself vigorously.
Yost brought the case on behalf of the Ohio Public Employees Retirement System, and seeks to represent a class of everyone who purchased Facebook stock between April 29 and October 21 of this year.
During that time, Facebook “repeatedly assured investors that it has 'the most robust set of content policies out there' and touted the aggressive steps it takes to ensure the safety and security of its users by preventing misinformation and harmful content from spreading through its platforms,” the complaint asserts.
Yost says Facebook's stock price fell more than 14% between September 13, when The Wall Street Journal published its first story based on Haugen's documents -- and October 21.
Yost isn't the first to bring a securities lawsuit against Facebook over Haugen's revelations.
Late last month, shareholder Wee Ann Ngian brought a similar class-action complaint in federal court in the Eastern District of New York. In that case, Ngian proposed a class consisting of everyone who purchased stock in Facebook between November 3, 2016 and October 4 of this year.
This lawsuit marks the second time this year Yost has taken on a Silicon Valley company. In July, he asked a state court to declare Google a “common carrier,” and prohibit the company from prioritizing its services or products in the results.