Shareholders of Facebook stock sued the social media giant alleging that Facebook made misleading claims about its use of user data, which blew up this month when its alleged relationship to a Trump-linked data firm was made public.
Shares of Facebook’s stocks toppled more than $20 over two days earlier this week after the New York Times and the Observer of London reported that Facebook did not tell users that their private data was being harvested by Cambridge Analytica, a political data firm with ties to President Donald Trump’s 2016 campaign.
The suit also names Facebook Chief Executive Officer Mark Zuckerberg and Chief Financial Officer David Wehner.
In May 2017, Reuters broke the first story about issues relating to Facebook’s data sharing. The social network had been fined by the French government for failing to prevent user data from being accessed by advertisers, the story said.
On this news, Facebook’s share price fell $5.34 or 3.6 percent, over two trading days, to close at $144.85, the complaint alleges.
Then, earlier this week, the Cambridge Analytica story was published.
In 2014 and 2015, Aleksandr Kogan, a researcher hired by Cambridge Analytica, convinced 270,000 Facebook users to sign up for a psychological testing app, the Times reported earlier this week. Kogan and his team exploited Facebook’s terms of service to harvest data not only on app users but also on their Facebook friends, ballooning the total number of users in its data pool to around 50 million, the Times reported.
The data included where a user lived and what they “liked” on Facebook — information that Cambridge Analytica, which was backed by conservative political megadonor Robert Mercer, used to create detailed profiles on unwitting American voters, the Times reported. The research firm on Monday denied that it had provided such profiles to the Trump campaign, and blamed Kogan’s company, Global Science Research, for violating its contract by breaking data protection law.
On this news, Facebook’s share price fell $12.53, or 6.8 percent, to close at $172.56 on March 19 and then fell $7.73, or 4.5 percent, to close at $164.83 on March 20, 2018.
The case is Yuan v. Facebook, Inc. et al., 3:18-cv-01725, in the U.S. District Court for the Northern District of California.
