Facebook Overpaid FTC In Cambridge Analytica Settlement To Ensure Zuckerberg Personally Gets Off The Hook, Allege Shareholders

Facebook Inc. FB overpaid billions of dollars to the Federal Trade Commission in 2019 in order to protect CEO Mark Zuckerberg from personal liability related to the Cambridge Analytica data breach, the company's shareholders alleged in a pair of lawsuits.

What Happened: One of the lawsuits filed by two separate groups of Facebook shareholders on Tuesday claimed that the social media giant’s board approved a multi-billion settlement with the FTC to protect Zuckerberg from being named in the regulator’s complaint.

The lawsuit noted that in early 2019, the FTC had sent Facebook a draft compliant naming both the company and Zuckerberg as defendants. The lawsuits were first reported on by Politico.

The second lawsuit alleged that Cambridge Analytica’s use of personal user information was the “destined consequence” of Facebook’s business plans and the company failed in its obligation to protect user data.

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Why It Matters: The Facebook-Cambridge Analytica scandal uncovered in early 2018 was one of the most massive data breaches in digital media's history, and significantly influenced the public discourse around data privacy.

Facebook drew heavy scrutiny after data firm Cambridge Analytica was reported to have used Facebook data without users’ permission to try to influence the 2016 presidential election.

In July 2019, Facebook reached a $5 billion settlement with the U.S. Federal Trade Commission in the case. This was despite Facebook’s lawyers having determined that the company faced a fine closer to $107 million.

On the same day that the FTC settlement was announced, the U.S. Securities and Exchange Commission said that Facebook would pay $100 million as part of a settlement related to the agency’s investigation about the data breach.

Price Action: Facebook shares closed 0.5% higher in Tuesday’s trading at $357.48.

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