Facebook the ‘Largest Fraud in Corporate History’ – Fake Accounts and Customer Data Theft
Aaron Greenspan, who claims to be the original creator of Facebook, attacked the giants of Silicon Valley in a committee hearing at the UK Parliament – alleging fraud, dishonesty, and data theft on a massive scale.
“Mark is really somebody that lied to everybody around him for years and years”, a long time critic of Facebook, Aaron Greenspan, alleged in Parliament today.
“The scale has grown so immense that it affects nearly everyone. It was not orchestrated to produce a catastrophic result, nobody wanted that, but it has produced a catastrophic result.”
During a two-hour hearing before Parliament’s Sub-Committee on Disinformation, Mr Greenspan started by declaring that he holds a short position on Facebook stock, which means that he may stand to benefit – massively – if the stock declines in value.
He claimed that this does not colour his perspective on the company.
I personally believe that Facebook represents the largest fraud in corporate history ever. It has had, at its peak, a market capitalisation of $600 billion dollars.
Under close questioning, Mr Greenspan alleged that Facebook founder and chief executive officer Mark Zuckerberg, who he met at Harvard University 14 years ago, has exaggerated Facebook’s user base to a value equivalent to “five Bernie Madoff scandals”.
‘I think Mark has committed securities fraud on a number of occasions,’ he added.
The crux of the fraud alleged by Mr Greenspan is that Facebook has been under-reporting the number of fake accounts on its platform.
By Mr Greenspan’s own analysis of Facebook’s transparency data, the percentage of fake accounts on Facebook is at least 30%, but in filings to the US Securities and Exchange Commission (SEC), Facebook has claimed it stood at 1-5%.
“This is a big problem and it’s not something that many people understand well,” he explained.
“I personally believe that Facebook represents the largest fraud in corporate history ever. It has had, at its peak, a market capitalisation of $600 billion dollars.”
To be fair, Mark is not the only CEO that lies to investors on a regular basis. We see this with Elon Musk.Aaron Greenspan
He went on to allege that “Mark has committed securities fraud on a number of occasions, I think it’s been incredibly blatant and the SEC has done nothing about it because they are afraid of targeting a billionaire.”
Mr Greenspan also attributed the watchdog’s inaction to a belief that the “market will sort out all issues”.
This is “a common theme in the Trump administration with any federal agency now… They actually have one commissioner, in particular, Hester Peirce who believes that the market will sort out all issues and that there’s really no role for the SEC”.
“I believe it’s egregious,” he added. “There is seemingly no repercussion for lying to shareholders.”
“We’ve Seen this Movie Before”
“To be fair, Mark is not the only CEO that lies to shareholders on a regular basis, we see this with Elon Musk, we see this with pretty much every large company in some form or another, it’s unfortunate that that’s the state of affairs,” Mr Greenspan told MPs.
“But I do think that it’s been very clear and in broad daylight. We’ve seen this movie before in the financial crisis, in the Dotcom crash, it’s really nothing new.”
He added that the scale of fake accounts he believes he has found on Facebook is something that the social media giant should be “very scared” about. He declared that “I saw this coming 14 years ago”.
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“Were I in their position I would be afraid, because it is actually incredibly difficult to ferret out indicators of truth on social media”, Mr Greenspan said.
He ended by suggesting some regulatory solutions to the committee, such as that social media companies could be regulated like banks, that users could be taxed for their social media accounts, and that some of that money be used to fund investigative journalism.
Stealing Customer Data
During today’s session, Mr Greenspan was also asked: “Were there any warning signs of the Cambridge Analytica scandal?”
“This wasn’t so much a breach as it was a designed behaviour, and that design was made so on Mark’s orders,” Mr Greenspan replied.
“I told him about this issue – which was to do with friends of friends – on April 7th 2005. So that gave him plenty of time to mitigate that concern going forward.”
But, perhaps the most explosive part of today’s’ hearing was not about Facebook at all.
Greenspan also recalled that, in 2007, Mark Zuckerberg’s soon-to-be colleague Ed Baker was planning to break the law with a scheme allegedly designed to steal customer data. This allegation dates to before Mr Baker joined Facebook, when he was partnered with Mr Greenspan, working on a new piece of software in 2007.
Mr Greenspan told MPs: “When I worked with Ed [Baker] [in 2007], he suggested for the software that we were building that we should ask users [of the software] for access to their address book… and, regardless of whether the answer was yes or no, we should take that data anyway, and use that to send emails to other potential users.”
“At that point I quit.”