Facebook to Pay $100 Million SEC Fine Over Cambridge Data Use
(Bloomberg) -- Facebook Inc. will pay $100 million to resolve U.S. Securities and Exchange Commission claims that the social networking giant misled investors about the misuse of account holders’ data, adding to the litany of fines against the firm over privacy violations.
Even though Facebook was aware by late 2015 that an outside developer had been misusing information gathered from its customers, the company publicly downplayed any risk of the data being handled in violation of its rules as “merely hypothetical," the SEC said in a Wednesday statement. The allegations relate to data obtained by Cambridge Analytica, a consulting firm hired by President Donald Trump’s 2016 campaign.
Facebook’s settlement with the SEC, in which the company didn’t admit or deny wrongdoing, comes as the company also agreed to pay a record $5 billion penalty to resolve a related case brought by the Federal Trade Commission. The SEC, which polices what public companies disclose to their shareholders, alleged that Facebook failed to adhere to requirements for what firms must communicate to investors.
“Public companies must accurately describe the material risks to their business,” Stephanie Avakian, a co-director of the SEC’s enforcement division, said in the statement. “Facebook presented the risk of misuse of user data as hypothetical when they knew user data had in fact been misused.”
In regulatory filings from 2016 through March 2018, Facebook misled investors by not disclosing that Cambridge Analytica had transferred data related to 30 million U.S users, according to the SEC. Facebook further mislead shareholders by covering up the breach, telling reporters the company had not uncovered wrongdoing as late as 2017.
Facebook said in a blog post that it hopes the settlements let the company "close this chapter and turn our focus and resources toward the future."
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