Securities Class Action Filed Against Facebook, Executives

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Shareholders have filed a class action lawsuit against Facebook, Inc. and high-ranking company officers over alleged violations of the Securities and Exchange Act of 1934. Filed in Nevada district court, the lawsuit claims Facebook and its executives—with founder Mark Zuckerberg among the defendants—harmed shareholders by making materially false statements about the company’s “ability to sustain growth in paid advertising” after it came to light that the social media juggernaut had intentionally concealed problems with crucial advertising and content reporting metrics.

According to the 27-page complaint, Facebook concealed from shareholders and the Securities and Exchange Commission (SEC) that it had internally discovered problems with how video advertising and content metrics were being calculated. Before publicly announcing the metrics issue, the lawsuit contends, the defendants began selling off “substantial shares” of Facebook stock for a profit.

Even though Facebook publicly admitted to the video metrics miscalculation in September 2016, plaintiffs claim it did not inform investors that the problem would affect future ad revenue. “Once the truth regarding the ad metrics was revealed, and the expect impact the error would have on Facebook’s future revenue,” the lawsuit says, “stock prices continued to drop significantly resulting in significant financial losses to Facebook shareholders.”