On March 20, 2018, investors sued Facebook, Inc. (“Facebook” or the “Company”) in United States District Court, Northern District of California. Plaintiffs in the federal securities class action allege that they acquired Facebook stock at artificially inflated prices between February 3, 2017, and March 19, 2018 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. Here’s everything to know about the Facebook class action lawsuit:

Summary of the Allegations

Company Background

Founded in 2004, Facebook (NASDAQ: FB) operates a social networking platform “that allows people to communicate with their family, friends and coworkers.” It also “develops technologies that facilitate the sharing of information, photographs, website links, and videos.”

According to information posted on its website, the Company’s mission is to “give people the power to build community and bring the world closer together.” By the end of 2017 it had 1.4 billion daily active users on average and 2.13 billion monthly active users.

By the end of last year, the Company also employed more than 25,000 people at data centers and in offices on all six continents.

Summary of Facts

Facebook and two of its senior executives now stand accused of deceiving investors by lying about and withholding critical information about the Company’s business practices during the Class Period.

Specifically, they are accused of omitting truthful information about violations of its data privacy policies from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused the Company’s stock to trade at artificially inflated prices during the time in question.

The truth first surfaced on May 16, 2017, when Reuters reported that the French Commission on Informatics and Liberty (“CNIL”) fined the Company 150,000 Euro for “failing to prevent its users’ data from being accessed by advertisers.” Reuters also reported that the fine was purportedly “part of a wider European investigation also being carried out in Belgium, the Netherlands, Span and Germany into some of Facebook’s practices.”

Then, after the market closed on March 19, 2018, Bloomberg published an article in which it disclosed that the U.S. Federal Trade Commission (“FTC”) is “probing whether Facebook violated terms of a 2011 consent decree of its handling of user data that was transferred to Cambridge Analytica without [user] knowledge.”

The next day, several media outlets reported that “the U.K. Parliament had summoned Facebook Chief Executive Officer (“CEO”) Mark Zuckerberg (“Zuckerberg”) to give evidence over the scandal involving London-based Cambridge Analytica.”

A closer look…

As alleged in the March 20 complaint, the Company repeatedly made misleading public statements during the Class Period.

For example, on a form filed with the SEC at the beginning of the Class Period, the Company addressed disclosure of user data saying in pertinent part: “Security breaching and improper access to or disclosure of our data or user data, or other hacking, and phishing attacks on our systems, could harm our reputation and adversely affect our business.”

On another form filed with the SEC on May 14, 2018, the Company addressed the same topic, saying in pertinent part: “In addition, some of our developers or other partners, such as those that help us measure the effectiveness of ads, may receive or store information provided by us or by our users through mobile or web applications integrated with Facebook.”

What Facebook failed to disclose, however was that it “violated its own  purported data privacy policies by allowing third parties to access the personal data of Facebook users without the users’ consent,” and that the discovery of this conduct would “subject the Company to heightened regulatory scrutiny.”

Impact of the Alleged Fraud on Facebook’s Stock Price and Market Capitalization

The following chart illustrates the stock price during the class period:

Actions You May Take

If you have purchased shares during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole.

NOTE: The deadline to file for lead plaintiff in this class action is May 21, 2018. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court. Typically, the plaintiff or plaintiffs with the largest losses are appointed lead plaintiff.

In order to identify your potential exposure to the alleged fraud during the time in question, you may wish to perform an analysis of your transactions in Facebook common stock using court approved loss calculation methods.

Recently Filed Cases

Listed below are recently filed securities class action cases being monitored by us, along with the class period and the deadline to file a motion to be appointed as the Lead Plaintiff in the action.  Please contact us if you would like an LK report for any of these cases:

About Us

Levi & Korsinsky is a leading securities litigation firm with a hard-earned reputation for protecting investors’ rights and recovering losses arising from fraud, mismanagement and corporate abuse.  With thirty attorneys and offices in New York, Connecticut, California and Washington D.C., the firm is able to litigate cases in various jurisdictions in the U.S., England, and in other international jurisdictions.

Levi & Korsinsky provides portfolio monitoring services for high-net worth investors and institutional clients.  Our firm also assists investors in evaluating whether to opt-out of large securities class actions to pursue individual claims.

For additional information about this case or our institutional services, please contact us.