Meta argues Section 230 bars fake investment ad impersonation claims

A federal judge previously found that a similar case over Meta's involvement in Chinese pump-and-dump schemes did not fall under Section 230 protections.SAN FRANCISCO (CN) — Meta told a federal judge Thursday it is immune from claims brought by financial professionals who say the tech giant helped facilitate an investment scam that unlawfully used their names and likenesses to promote Chinese penny stocks.Meta attorney Sonal Mehta of WilmerHale argued Meta is exempt under Section 230 of the Communications Decency Act — which shields online businesses and social media platforms from liability for content posted by third parties — because scammers, and not Meta, created the content that contained impersonations of the plaintiffs.“What they are alleging is the likenesses and impersonation happened in the WhatsApp chats once the people were already in those chatrooms,” she said. “They admit Meta did not create that content. Just looking at allegations of the amended complaint, they admit Meta did not contribute to core illegality.”The class of financial professionals say their names, images, voices and personas were used in a pump-and-dump scheme orchestrated through Meta-owned WhatsApp. They say scammers used advertising tools, including generative AI tools, offered by Meta to create fraudulent ads for WhatsApp scam groups.They say users who clicked on the ads were added to WhatsApp groups, where the scammers, posing as the real financial advisors, encouraged them to purchase shares of specific stocks they predicted would have a positive return.However, the plaintiffs claim the scammers were running a securities scheme by “pumping,” or artificially inflating the stock price, before “dumping” their shares at the inflated prices, causing the stock to lose almost all its value.The plaintiffs sued Meta last October for impersonation and unfair competition, claiming the tech company was a “co-conspirator” in the scheme, because the AI tools were instrumental in the creation of the ads.U.S. Chief District Court Judge Richard Seeborg asked Mehta why he shouldn’t adopt an application of Section 230 as he did in Bouck v. Meta Platforms, Inc., which similarly accused Meta of helping scammers promote a Chinese penny stock scheme through fraudulent ads.In Bouck, Seeborg, a Barack Obama appointee, ruled Section 230 didn’t protect the tech giant since the images and text of the ads were AI-generated by Meta’s tools.Mehta argued the two cases were “fundamentally different,” and that, unlike in Bouck, the plaintiffs do not claim Meta materially contributed to the content that is at the center of their claims of impersonation — the messages in the WhatsApp groups run by the scammers.“They believe the ads are the thing that we materially contributed to. What you did not hear is that there is any impersonation in the ads. Even if you grant the material contribution theory, that is not where the impersonation happened,” she said, adding, “If they had ads to which Meta materially contributed to the impersonation, surely by now we would’ve seen it.”In contrast, the plaintiffs argued that the “core illegality” they claim is the identity misappropriation in the AI-generated ads. Attorney Sean Masson described how Meta’s tools take information from scammers to generate text for ads, resize the images and test compositions.However, Seeborg seemed skeptical that the details of Meta’s involvement in the ads go towards the plaintiffs’ impersonation claim.“None of that goes to the nature of your claim, which is impersonation. All you are saying is that Meta is directing people to where the impersonation is going on. Creating the impersonations, they are not involved in that,” he said.Masson additionally argued that even if the judge finds Section 230 exempts Meta from the impersonation claims, the plaintiffs’ unfair competition claim should survive dismissal.“Meta promised to remove impersonation content, but it did not,” Masson said.In rebuttal, Mehta said the company doesn’t promise users it will take down anything.“When you read the terms of service, there is no take-down promise, nor could there be given the volume of content,” she said.Seeborg said he would take the dismissal motion under submission and did not indicate when he would release a ruling.Seeborg later dismissed the Bouck case over jurisdictional issues in June, ruling that the Securities Litigation Uniform Standards Act preempts their claims. Under the 1998 law, federal courts must dismiss certain securities class actions claiming a “misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security."Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads