Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 1 of 48
`
`Adam M. Apton (State Bar No. 316506)
`LEVI & KORSINSKY, LLP
`388 Market Street, Suite 1300
`San Francisco, CA 94111
`Telephone: 415-373-1671
`Facsimile: 212-363-7171
`Email: aapton@zlk.com
`
`Mark S. Reich (pro hac vice to be filed)
`Courtney E. Maccarone (pro hac vice to be filed)
`LEVI & KORSINSKY, LLP
`55 Broadway, 10th Floor
`New York, NY 10006
`Telephone: 212-363-7500
`Facsimile: 212-363-7171
`Email: mreich@zlk.com
` cmaccarone@zlk.com
`
`Attorneys for Plaintiffs and the Proposed
`Classes
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`CHRISTOPHER CALISE and ANASTASIA
`GROSCHEN, Individually and On Behalf of
`All Others Similarly Situated,
`
`Case No.
`
`CLASS ACTION COMPLAINT
`
`v.
`
`FACEBOOK, INC.,
`
`Plaintiffs,
`
`Defendant.
`
`(1) Negligence
`(2) Breach of Contract
`(3) Breach of the Covenant of Good Faith and
`Fair Dealing
`(4) Violations of Cal. Bus. & Bus. Prof. Code §
`17200, et seq.
`(5) Unjust Enrichment
`
`JURY TRIAL DEMANDED
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`CLASS ACTION COMPLAINT
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 2 of 48
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`
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`Plaintiffs Christopher Calise and Anastasia Groschen (“Plaintiffs”), individually and on
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`behalf of all others similarly situated, by and through their undersigned counsel, bring this class
`
`action complaint seeking monetary and injunctive relief against Defendant Facebook, Inc.
`
`(“Facebook” or the “Company”).1 Plaintiffs allege the following upon information and belief
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`based on the investigation of counsel, except as to those allegations that specifically pertain to
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`Plaintiffs, which are alleged upon personal knowledge.2
`
`NATURE OF THE ACTION
`
`1.
`
`This case seeks to put an end to Facebook’s policy of actively soliciting,
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`encouraging, and assisting scammers it knows, or should know, are using its platform to defraud
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`Facebook users with deceptive ads, and compel Facebook to either compensate Facebook users
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`for their losses or disgorge the billions of dollars in profits it has unjustly earned from such
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`misconduct.
`
`2.
`
`Facebook collects vast amounts of data from each Facebook user. While Facebook
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`does not pay users for it, this data has enormous financial value since it enables Facebook to sell
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`precisely targeted ads to millions of advertisers. Scammers discovered they could exploit these
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`targeting capabilities to get deceptive, false and/or misleading ads viewed by the Facebook users
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`most likely to click those ads and be lured into bait-and-switch and other fraudulent schemes (the
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`“Deceptive Facebook Ads”). As various scammers told Bloomberg News in 2017, Facebook has
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`“revolutionized scamming.”3
`
`3.
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`Given the foreseeability of material harm to Facebook users from scammers,
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`Facebook should have promptly shut down these scammers as soon as they started surfacing on its
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`platform. Facebook had and continues to have a duty to do so given, among other factors, (i)
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`promises in its Terms of Service to remove false and misleading ads, (ii) advertising policies
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`1 Plaintiff Calise sought to address and resolve the allegations and relief sought in this complaint
`through a pre-suit demand, dated June 1, 2021, and subsequent discussions by and between counsel
`for Plaintiffs and Facebook.
`2 All emphasis herein is added, unless otherwise noted.
`3 Zeke Faux, How Facebook Helps Shady Advertisers Pollute the Internet, BLOOMBERG
`BUSINESSWEEK (March 27, 2018) https://www.bloomberg.com/news/features/2018-03-27/ad-
`scammers-need-suckers-and-facebook-helps-find-them (last visited on July 2, 2021).
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 3 of 48
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`strictly prohibiting such ads, and (iii) the vast investigative, technical, and financial capabilities
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`and resources at Facebook’s disposal to combat fraud. But Facebook refuses to drive scammers
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`off its platform because it generates billions of dollars per year in revenue from Deceptive
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`Facebook Ads.
`
`4.
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`Facebook has done much more than passively create and maintain a platform on
`
`which scammers can brazenly target users with scams. According to internal Facebook
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`documents, and current and former Facebook employees and contractors recently interviewed by
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`various investigative journalists at prominent publications,4 Facebook actively solicits,
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`encourages, and assists scammers in numerous ways. On the revenue side, according to these
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`investigations, Facebook’s sales teams have presented at conferences heavily attended by known
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`scammers, socialized with known scammers for business development purposes, and met revenue
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`quotas by encouraging known scammers to continue buying Facebook ads. Facebook’s sales teams
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`have also been aggressively soliciting ad sales in China and providing extensive training services
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`and materials to China-based advertisers, despite an internal study showing that nearly thirty
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`percent (30%) of the ads placed by China-based advertisers — estimated to account for $2.6 billion
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`in 2020 ad sales alone — violated at least one of Facebook’s own ad policies.
`
`5.
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`On the enforcement side, according to these investigations, Facebook has
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`affirmatively directed employees and contractors tasked with monitoring Facebook’s platform for
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`deceptive ads to (i) ignore ads placed by hacked Facebook accounts and pages, as long as Facebook
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`gets paid for these ads, and (ii) ignore violations of Facebook’s Ad Policies, especially by China-
`
`based advertisers (since Facebook “want[s] China revenue”).
`
`6.
`
`In October 2020, the Federal Trade Commission (“FTC”) reported that about 94%
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`of the complaints it collected concerning online shopping fraud on social media identified
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`Facebook (or its Instagram site) as the source.5
`
`4 See footnotes 21-34 and 40 infra.
`5 Press Release, Federal Trade Commission, FTC Data Shows Big Jump in Consumer Reports
`about Scams Originating on Social Media (Oct. 21, 2020),https://www.ftc.gov/news-
`events/press-releases/2020/10/ftc-data-shows-big-jump-consumer-reports-about-scams-
`originating, (last visited on July 2, 2021).
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 4 of 48
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`
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`7.
`
`Cracking down on scammers would jeopardize the billions of dollars per year in ad
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`revenue that Facebook collects from scammers. Therefore, even as Facebook’s public relations
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`team touts the closing of certain accounts and lawsuits targeting a few scammers, Facebook
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`remains economically motivated to continue soliciting, encouraging, and assisting scammers at the
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`expense of its users. As Tim Hwang, the author of a book on ad fraud, told Buzzfeed, “I think the
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`profit motive definitely makes it harder for Facebook to take real steps here.”6 Therefore,
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`declaratory and injunctive relief is necessary to prevent future harm to Facebook users.
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`8.
`
`The injunctive relief (“Proposed Injunctive Relief”) that Plaintiffs seek includes,
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`but is not limited to, directing Facebook to implement and monitor changes to Facebook’s
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`processes, practices, and policies to substantially reduce the display of Deceptive Facebook Ads
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`on Facebook’s website and protect Facebook users from being victimized by scam ads, including
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`without limitation, implementing and monitoring changes to processes, practices, and policies with
`
`respect to:
`
`(a)
`
`vetting new advertisers before permitting them to display ads – particularly
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`prospective advertisers based in China and other countries where a material
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`percentage of ads violate Facebook's ad policies;
`
`(b)
`
`preventing repeat offenders from circumventing enforcement mechanisms
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`to continue displaying scam ads (e.g., through hacking and/or set-up of new
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`Facebook accounts);
`
`(c)
`
`promptly processing and responding to reports of scam ads submitted by
`
`Facebook users;
`
`(d)
`
`(e)
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`identifying and promptly removing ads that violate Facebook’s ad policies;
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`educating users about the location and use of tools available to protect
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`themselves against scam ads, and how to report scam ads to Facebook;
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`6 Craig Silverman and Ryan Mac, Facebook Gets Rich Off Of Ads That Rip Off Its Users
`BUZZFEED NEWS (Dec. 10, 2020),
`https://www.buzzfeednews.com/article/craigsilverman/facebook-ad-scams-revenue-china-tiktok-
`vietnam (last visited on July 2, 2021).
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 5 of 48
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`(f)
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`compensating Facebook employees and contractors tasked with monitoring
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`Facebook’s websites for scam ads to ensure, among other things, that such
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`employees and contractors are incentivized to prioritize protection of
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`Facebook users from Deceptive Facebook Ads without having to consider
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`the ramifications of their actions on Facebook’s revenue;
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`(g)
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`compensating Facebook’s sales, marketing, and business development
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`teams to ensure, among other things, that such teams are not financially
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`incentivized to solicit scammers or encourage scammers to continue
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`purchasing Facebook ads (including but not limited a review of ad sales
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`practices with respect to China and other countries where a material
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`percentage of ads violate Facebook’s ad policies); and
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`(h)
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`expanding Facebook’s existing Purchase Protection program for purchases
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`made on the Facebook website to victims who are tricked by scammers into
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`fraudulent transactions occurring off the Facebook website.
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`9.
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`Plaintiffs also seek monetary relief in the form of damages and/or disgorgement of
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`profits unjustly earned by Facebook. By collecting troves of data from Facebook users without
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`compensating them, and then earning vast sums from scammers who leverage that data to target
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`Deceptive Facebook Ads at vulnerable Facebook users, Facebook has breached legal and
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`contractual duties owed to its users, and unjustly enriched itself at their expense.
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`10. Plaintiffs seek monetary, declaratory, and injunctive relief against Facebook on behalf
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`of themselves and other similarly-situated Facebook users by asserting claims for negligence;
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`breach of contract; breach of the covenant of good faith and fair dealing; violations of California’s
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`Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200, et seq.) (“UCL”); and unjust
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`enrichment.
`
`PARTIES
`
`11.
`
`Plaintiff Christopher Calise is citizen and resident of the State of Oregon, and over
`
`the age of eighteen years. Mr. Calise has had a Facebook account since 2009.
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 6 of 48
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`
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`12.
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`Plaintiff Anastasia Groschen is a citizen and resident of the State of Nebraska, and
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`over the age of eighteen years. Ms. Groschen has had a Facebook account since 2007.
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`13.
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`Facebook is a publicly-traded Delaware corporation with its principal place of
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`business located within this District at 1 Hacker Way, Menlo Park, California 94025.
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`14.
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`Facebook conceived, reviewed, approved, directed, and controlled the misconduct
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`alleged herein in California; and collected the revenue wrongfully earned from such misconduct
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`in California.
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`JURISDICTION, VENUE AND CHOICE OF LAW
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`15.
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`This Court has subject matter jurisdiction over Plaintiffs’ claims under 28 U.S.C.
`
`§1332(d)(2), the Class Action Fairness Act of 2005, because at least one member of the Class,
`
`which exceeds 100 members in the aggregate, is a citizen of a different state than Facebook and
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`the amount in controversy exceeds $5,000,000, exclusive of interest and costs.
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`16.
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`This Court has personal jurisdiction over Facebook because it transacts business in
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`this State, and because the tortious conduct alleged in this Complaint occurred in, was directed to,
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`and/or emanated from California.
`
`17.
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`Venue is proper in this District under 28 U.S.C. §1391 because Facebook is
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`headquartered in this District, and conducts business transactions in this District, and because the
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`wrongful conduct giving rise to this case occurred in, was directed from, and/or emanated from
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`this District.
`
`18.
`
`Facebook’s Terms of Service contains a choice of law and venue provision
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`providing as follows:
`
`For any claim, cause of action, or dispute you have against us that arises out of or
`relates to these Terms or the Facebook Products (“claim”), you agree that it will be
`resolved exclusively in the U.S. District Court for the Northern District of
`California or a state court located in San Mateo County. You also agree to submit
`to the personal jurisdiction of either of these courts for the purpose of litigating any
`such claim, and that the laws of the State of California will govern these Terms
`and any claim, without regard to conflict of law provisions.7
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`7 Facebook Terms of Service, https://www.facebook.com/terms.php (last visited on July 2, 2021).
`CLASS ACTION COMPLAINT
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 7 of 48
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`
`
`A.
`
`The User Data Fueling Facebook’s Advertising Revenue
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`FACTUAL ALLEGATIONS
`
`19.
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`Facebook is the world’s largest social media company, providing its users with
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`social networking services that enable them to connect and communicate with family, friends and
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`colleagues concerning subjects of common interest.
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`20.
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`As of March 31, 2021, Facebook reported 2.85 billion monthly active users, and
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`1.88 billion daily active users. Facebook has become such a staple of 21st-century life — with
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`huge numbers of people relying on it daily for news, product recommendations and social
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`interaction — that many politicians and academics have characterized it as a public utility.8 Indeed,
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`in a 2007 interview with Time, Facebook’s CEO, Mark Zuckerberg, himself characterized
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`Facebook as a “social utility.”9
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`21.
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`Facebook does not charge Facebook users for its services. Instead, it generates
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`virtually all of its revenue from selling advertising to businesses seeking to market their products
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`and services to Facebook users. During 2020, Facebook generated revenue of $85.97 billion, of
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`which 98%, or $84.17 billion, was from advertising.
`
`22.
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`Facebook has over 7 million active monthly advertisers.10
`
`
`8 See also Dipayan Ghosh, Don’t Break Up Facebook—Treat It Like a Utility, HARVARD
`BUSINESS REVIEW (May 30, 2019), https://hbr.org/2019/05/dont-break-up-facebook-treat-it-like-
`a-utility (last visited on July 2, 2021); Anjana Susarla, Facebook shifting from open platform to
`public utility, UPI (Aug. 17, 2018),
`https://www.upi.com/Top_News/Voices/2018/08/17/Facebook-shifting-from-open-platform-to-
`public-utility/1721534507642/ (last visited on June 23, 2021); Ryan Grim, Steven Bannon Wants
`Facebook and Google Regulated Like Utilities, THE INTERCEPT (July 27, 2017),
`https://theintercept.com/2017/07/27/steve-bannon-wants-facebook-and-google-regulated-like-
`utilities/ (last visited on July 2, 2021).
`9 Lauren Locke, The Future of Facebook, TIME (July 17, 2007),
`http://content.time.com/time/business/article/0,8599,1644040,00.html (last visited on July 2,
`2021).
`10 Facebook for Business, Insights to Go, FACEBOOK, https://www.facebook.com/iq/insights-to-
`go/6m-there-are-more-than-6-million-active-advertisers-on-facebook (last accessed July 2,
`2021).
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 8 of 48
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`
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`23.
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`Facebook’s pitch to advertisers is simple: we leverage user data to show the right
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`ads to the right people. As Zuckerberg testified before the Senate’s Commerce and Judiciary
`
`Committees on April 10, 2018:
`
`What we allow is for advertisers to tell us who they want to reach, and then we do
`the placement. So, if an advertiser comes to us and says, ‘All right, I am a ski shop
`and I want to sell skis to women,’ then we might have some sense, because people
`shared skiing-related content, or said they were interested in that, they shared
`whether they’re a woman, and then we can show the ads to the right people. . .”11
`
`24.
`
`To fulfill its promise to advertisers to target the right ads at the right people,
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`Facebook collects massive amounts of data concerning its users. For example, on December 27,
`
`2016, the investigative nonprofit, ProPublica, reported that it had identified more than 52,000
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`unique interest categories used by Facebook to classify its users (such as interests in different types
`
`of food, stores, clothing, movies, etc.).12 These interests are inferred by Facebook in part based on
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`the actions that users take while they are logged in to Facebook, such the pages they have liked or
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`ads they have clicked. As ProPublica explained: “Every time a Facebook member likes a post, tags
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`a photo, updates their favorite movies in their profile, posts a comment about a politician, or
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`changes their relationship status, Facebook logs it.”13
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`25.
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`Facebook also collects information about pages that users visit outside of the
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`Facebook platform. For example, the Facebook pixel is a small piece of code that businesses can
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`11 See Joint Full Committee Hearing, Facebook, Social Media Privacy, and the Use and Abuse
`of Data, COMMITTEE ON THE JUDICIARY (Apr. 10, 2018, 2:15 PM),
`https://www.judiciary.senate.gov/meetings/facebook-social-media-privacy-and-the-use-and-
`abuse-of-data (last visited on July 2, 2021); Transcript of Mark Zuckerberg’s Senate Hearing,
`THE WASHINGTON POST (Apr. 10, 2018), https://www.washingtonpost.com/news/the-
`switch/wp/2018/04/10/transcript-of-mark-zuckerbergs-senate-
`hearing/?utm_term=.08d8f25b84bf (last accessed July 2, 2021).
`12 Julia Angwin, Surya Mattu and Terry Parris Jr., Facebook Doesn’t Tell Users Everything It
`Really Knows About Them, PROPUBLICA (Dec. 27, 2016),
`https://www.propublica.org/article/facebook-doesnt-tell-users-everything-it-really-knows-about-
`them (last visited on July 2, 2021). See also Facebook Ad Categories, PROPUBLICA DATA
`STORE (Dec. 2016), https://www.propublica.org/datastore/dataset/facebook-ad-categories (last
`visited on June 23, 2021).
`13 Julia Angwin, Terry Parris Jr. and Surya Mattu, What Facebook Knows About You,
`PROPUBLICA (Dec. 28, 2016), https://www.propublica.org/article/breaking-the-black-box-what-
`facebook-knows-about-you (last visited on July 2, 2021).
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`put on their website to track what pages users visited, and what purchases they made, and match
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`this data back to Facebook user profiles for the purpose of displaying ads.14
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`26. Whenever a new user logs in to Facebook’s platform, Facebook’s software accesses
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`the data it has collected on that user to determine what ads to display. The selection process takes
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`the form of an online auction in which advertisers compete to show their ads to a particular
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`Facebook user whom Facebook predicts (based on user data) will be interested in those ads. Since
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`there are nearly two billion daily active Facebook users, billions of these auctions occur every day
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`(each taking milliseconds).15
`
`27.
`
`The set of instructions that Facebook’s software follows to determine which ads to
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`display to a particular user is known as an algorithm. Facebook’s ad algorithm weighs three factors:
`
`(i) an advertiser’s bid, (ii) estimated action rate, and (iii) ad quality. The “estimated action rate” is
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`the algorithm’s estimate of how likely a particular user is to click, view or otherwise engage with
`
`a particular ad based on that user’s data points, while “ad quality” is a variable based on feedback
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`from various sources concerning the text and images in an ad.16
`
`B.
`
`Facebook’s Terms of Service
`
`28.
`
`Section 1 of Facebook’s Terms of Service (see supra note 7) (“TOS”) — titled “The
`
`services we provide” — provides in relevant part:
`
`Our mission is to give people the power to build community and bring the world
`closer together. To help advance this mission, we provide the Products and services
`described below to you….
`
`Combat harmful conduct and protect and support our community:
`
`People will only build community on Facebook if they feel safe. We employ
`dedicated teams around the world and develop advanced technical systems to
`detect misuse of our Products, harmful conduct towards others, and situations
`where we may be able to help support or protect our community. If we learn of
`content or conduct like this, we will take appropriate action - for example, offering
`help, removing content, removing, or restricting access to certain features, disabling
`an account, or contacting law enforcement. We share data with other Facebook
`
`14 Show your ads to the right people with the Facebook pixel, FACEBOOK FOR BUSINESS,
`https://www.facebook.com/business/m/pixel-manual-install (last visited on July 2, 2021).
`15 Business Help Center, About Ad Auctions, FACEBOOK FOR BUSINESS,
`https://www.facebook.com/business/help/430291176997542 (last visited on July 2, 2021).
`16 Id.
`
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 10 of 48
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`Companies when we detect misuse or harmful conduct by someone using one of
`our Products.
`
`Use and develop advanced technologies to provide safe and functional services for
`everyone:
`
`We use and develop advanced technologies - such as artificial intelligence, machine
`learning systems, and augmented reality - so that people can use our Products safely
`regardless of physical ability or geographic location . . . And we develop automated
`systems to improve our ability to detect and remove abusive and dangerous
`activity that may harm our community and the integrity of our Products.
`
`29.
`
`Section 3 of the TOS — titled “Your commitments to Facebook and our
`
`community” — provides in relevant part:
`
`We provide these services to you and others to help advance our mission. In
`exchange, we need you to make the following commitments….
`
`2. What you can share and do on Facebook:
`
`We want people to use Facebook to express themselves and to share content that is
`important to them, but not at the expense of the safety and well-being of others or
`the integrity of our community. You therefore agree not to engage in the conduct
`described below (or to facilitate or support others in doing so):
`
`1. You may not use our Products to do or share anything:
`
`
`
`
`
`That violates these Terms, our Community Standards, and other terms and
`policies that apply to your use of Facebook.
`
`That is unlawful, misleading, discriminatory, or fraudulent.
`
`30.
`
`The Community Standards referenced in Section 3 of the TOS are hyperlinked to a
`
`page that provides in relevant part: “Safety: We are committed to making Facebook a safe place.”17
`
`Under “Safety,” there is section specifying conduct that is prohibited because it is violent or
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`criminal, including “5. Fraud and Deception: “In an effort to prevent fraudulent activity that can
`
`harm people or businesses, we remove content that purposefully deceives, willfully
`
`misrepresents or otherwise defrauds or exploits others for money or property. This includes
`
`content that seeks to coordinate or promote these activities using our services. We allow people to
`
`17 See Community Standards, Introduction,
`FACEBOOK,https://www.facebook.com/communitystandards/introduction (last visited on July 2,
`2021).
`
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 11 of 48
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`
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`raise awareness and educate others as well as condemn these activities.”18 The next paragraph in
`
`the “Fraud and Deception” section warns users against posting content “Deceiving others to
`
`generate a financial or personal benefit to the detriment of a third party or entity through [various
`
`scams].”
`
`31.
`
`Section 5 of the TOS — titled “Other terms and policies that may apply to you” —
`
`links in the third bullet to Facebook’s Advertising Policies, which is described as specifying “the
`
`types of content that may appear in Facebook ads.” Facebook’s Advertising Policies prohibit ads
`
`that, inter alia: (i) contain deceptive, false, or misleading claims like those relating to the
`
`effectiveness or characteristics of a product or service (e.g., false or misleading claims about
`
`product attributes, quality, or functionality), and (ii) promote products, services, schemes or offers
`
`using deceptive or misleading practices, including those meant to scam people out of money or
`
`personal information (e.g., use of a picture of a public figure to mislead users into buying a scam
`
`product).19 Additionally, Facebook’s Advertising Policies prohibit advertisers from using “tactics
`
`intended to circumvent our ad review process or other enforcement systems.”20
`
`C. How Facebook Actively Solicits, Encourages and Assists Scammers
`
`32.
`
`In March 2018, Bloomberg News reporter Zeke Faux published an article
`
`describing his experiences at an Internet marketing conference in Berlin sponsored by an online
`
`forum called Stack That Money (STM).21 Faux reported that a significant number of the attendees
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`18 See Community Standards, 5. Fraud and Deception,
`FACEBOOK,https://www.facebook.com/communitystandards/fraud_deception/ (last visited on
`July 2, 2021).
`19 See Advertising Policies, FACEBOOK, (https://www.facebook.com/policies/ads/); Advertising
`Policies, 23. Misleading Claims,
`FACEBOOK,https://www.facebook.com/policies/ads/prohibited_content/misleading_claims;
`Advertising Policies, 27. Unacceptable Business Practices,
`FACEBOOK,https://www.facebook.com/policies/ads/prohibited_content/unacceptable_business_p
`ractices(last visited on July 2, 2021).
`20 See Advertising Policies, 28. Circumventing Systems, FACEBOOK,
`https://www.facebook.com/policies/ads/prohibited_content/circumventing_systems (last visited
`on July 2, 2021).
`21 “How Facebook Helps Shady Advertisers Pollute the Internet” March 27, 2018
`https://www.bloomberg.com/news/features/2018-03-27/ad-scammers-need-suckers-and-
`facebook-helps-find-them (last visited on July 2, 2021).
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 12 of 48
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`
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`at the conference were affiliate marketers who earned commissions selling shady products such as
`
`diet pills by running Facebook ads featuring deceptive pitches like fake celebrity endorsements.
`
`Exhibitors at the conference pitched these marketers on campaign ideas such as “You Won an
`
`iPhone” and “Your Computer May be Infected,” and services such as fake Facebook ad accounts.
`
`33. While the conference was officially sponsored by STM, Faux wrote that “a
`
`newcomer could be forgiven for wondering if it was somehow sponsored by Facebook Inc.” As
`
`Faux observed, saleswomen from Facebook “held court onstage, introducing speakers and
`
`moderating panel discussions,” and “[a]fter the show, Facebook representatives flew to [the
`
`Spanish isle of] Ibiza on a plane rented by Stack That Money to party with some of the top
`
`affiliates.”
`
`34.
`
`Facebook’s strong presence at the Berlin conference was no coincidence, as
`
`attendees were some of Facebook’s best customers who spent millions of dollars a year displaying
`
`Deceptive Facebook Ads. As marketers explained to Faux, Facebook’s trove of user data had
`
`“revolutionized scamming” by automatically identifying the “suckers” most likely to click
`
`Deceptive Facebook Ads for their shady products and services:
`
`Affiliates once had to guess what kind of person might fall for their unsophisticated
`cons, targeting ads by age, geography, or interests. Now Facebook does that work
`for them. The social network tracks who clicks on the ad and who buys the pills,
`then starts targeting others whom its algorithm thinks are likely to buy. Affiliates
`describe watching their ad campaigns lose money for a few days as Facebook
`gathers data through trial and error, then seeing the sales take off exponentially.22
`
`35.
`
`As one affiliate selling deceptively priced skin-care creams with fake endorsements
`
`from Chelsea Clinton succinctly put it, Facebook goes out and “find[s] the morons for me.”23
`
`36. When asked by Faux which tools they were using to manage their deceptive
`
`advertising campaigns, many marketers identified Voluum, an application developed by a former
`
`STM member named Robert Gryn (see https://voluum.com/). Gryn’s Voluum software was
`
`popular with marketers because, among other features, it made it easy for marketers to evade the
`
`
`22 Zeke Faux, How Facebook Helps Shady Advertisers Pollute the Internet, BLOOMBERG
`BUSINESSWEEK (March 27, 2018) https://www.bloomberg.com/news/features/2018-03-27/ad-
`scammers-need-suckers-and-facebook-helps-find-them (last visited on July 2, 2021).
`23 Id.
`
`
`
`
`
`
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 13 of 48
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`
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`token digital defenses erected by Facebook to detect scam ads. For example, Voluum enables
`
`affiliates to tailor the ads they display by IP address, which identifies the location of the device
`
`being used by an individual to access the Internet. This feature allows marketers to “identify the
`
`addresses of Facebook’s ad reviewers and program campaigns to show them, and only them,
`
`harmless content.”24
`
`37.
`
`Yet, according to Faux — despite the extensive use of Voluum by scammers —
`
`Facebook’s most senior executive tasked with enforcing its Ad Policies and fighting deceptive ads,
`
`Rob Leathern, invited Gryn to visit Facebook’s London office. This was also no coincidence,
`
`because (according to reports that Gryn showed Faux) affiliates using Voluum alone placed $400
`
`million worth of ads a year on Facebook. Notably, while Google banned Voluum, Facebook did
`
`not.25
`
`38. While Facebook’s salespeople were courting scammers, the Facebook teams
`
`charged with combatting Deceptive Facebook Ads were woefully understaffed. According to one
`
`Facebook engineer, the company was more “focused on checking whether ads followed policies
`
`about things such as the percentage of text and images,” than on “catching people with bad
`
`intentions.”26 Indeed, marketers told Faux that getting caught and banned by Facebook for
`
`deceptive ads was no big deal — “they just opened a new Facebook account under different names
`
`. . . [bought] clean profiles . . . rent[ed] accounts from strangers or cut deals with underhanded
`
`advertising agencies to find other solutions.”27
`
`39. Moreover, even as Facebook banned certain accounts, its salespeople encouraged
`
`the affiliates that opened them to “come to their meetups and parties and . . . buy more ads.”28 As
`
`two former Facebook employees who worked in the Toronto sales office told Faux, “it was
`
`common knowledge there that some of their best clients were affiliates who used deception.”29
`
`
`
`24 Id.
`25 See id. (“Google banned Voluum over cloaking concerns, but that didn’t derail the company—
`Facebook was where the action was”).
`26 Id.
`27 Id.
`28 Id.
`29 Id.
`
`
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`Case 4:21-cv-06186-KAW Document 1 Filed 08/11/21 Page 14 of 48
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`
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`These salespeople were instructed to push deceptive marketers “to spend more,” with “the rep who
`
`handled the dirtiest accounts [having] a quota of tens of millions of dollars per quarter.”30
`
`D. How Facebook Actively Solicits, Encourages and Assists Scammers Based in China
`
`40.
`
`Leathern (Face