SAN FRANCISCO — A consortium of Facebook insiders and critics filed a confidential whistleblower’s complaint to the Securities and Exchange Commission late Tuesday, claiming the social media giant is aware of illegal activity on its platform, such as the sale of opioids, and has failed to properly police it.
The filing is part of a campaign by the National Whistleblower Center to hold Facebook accountable for unchecked criminal activity on its properties. By petitioning the SEC, the consortium is attempting to get around a bedrock law — Section 230 of the Communications Decency Act — that exempts Internet companies from liability for the user-generated content on their platform.
Instead, the complaint focuses on federal securities law, arguing that Facebook’s failure to tell shareholders about the extent of illegal activity on its platform is a violation of its fiduciary duty. If Facebook alienates advertisers and has to shoulder the true cost of scrubbing criminals from its social networks, it could affect investors in the company, the complaint argues.
In a statement to The Post, Facebook spokesman Joe Osborne said, “We can’t comment on the substance of a complaint we haven’t seen, but we’ve regularly disclosed potential risks related to content in our SEC filings, including at least four times in the last year.”
The consortium is led by Gretchen Peters, an award-winning journalist formerly with ABC News and author of the 2010 book “Seeds of Terror,” which documented the Taliban’s role in the Afghan heroin trade. She is now executive director of the Alliance to Counter Crime Online (ACCO), a D.C.-based groups of investigators and academics taking on Big Tech.
Peters helped coordinate earlier petitions to the SEC about Facebook’s failure to police wildlife trafficking and stolen antiquities. Each time, more Facebook whistleblowers joined the fold, she said. Tuesday’s filing is the first time the group includes someone who previously worked at the company. In a sworn statement attached to the complaint, a former Facebook content moderator said the social network’s moderation policies were ad hoc and often changed in response to media events. “Compared to hate speech, they did not seem to worry about drugs at all,” the statement said.
The new filing is the first time the group has presented the SEC with evidence of possible drug-related crimes on Facebook. The petition offers plenty of instances of drug dealers using hashtags and comments sections to advertise their wares but does not offer any estimates about the overall size of the drug market on Facebook, in part because researchers do not have access to private groups.
Facebook’s most recent transparency report notes that drug content removed was up to 8.8 million pieces of content in the final quarter of 2019.
Under the Dodd-Frank Act, whistleblowers can be outside observers of a company, as well as company insiders.
The ex-moderator, whose job was to track graphic content in private Facebook groups, claims that if moderators saw discussions about illicit payments for illegal goods, such as child pornography or illegal narcotics, they had no way to warn executives running Facebook Pay, the system that lets users send and receive money across the main social network, Messenger, Instagram and WhatsApp.
“There were groups where pornographic content related to children was auctioned. And they used [Facebook] systems [for] all of it, from what I could see,” the ex-moderator wrote in a sworn statement.
Another whistleblower behind the complaint is an ex-employee at a cyber security firm hired by Purdue Pharma to police online counterfeiters of its drug OxyContin. This person said other Internet platforms such as eBay, Alibaba, Craigslist and Google agreed to work with the cybersecurity firm to take down illegal offers to sell OxyContin around 2012 and 2013. Facebook, however, refused to take action on its main site as well as on Instagram, the person claims in a statement.
“Facebook executives were made aware the scale of counterfeit OxyContin being sold across their platforms was enormous. But while other tech firms and the pharmaceutical industry invested heavily in resources to mitigate the damage of illegal narcotic sales online killing tens of thousands of Americans, Facebook executives aggressively lobbied other social media platforms including Twitter not to take action or to engage in the counterfeit OxyContin removal initiative,” the statement says.
Facebook says that since 2013 it has been a member of Center for Safe Internet Pharmacies (CSIP), a nonprofit organization to address consumer access to illegitimate pharmaceuticals from illegal online pharmacies and other sources. Of CSIP, the Purdue contractor’s statement says, “Facebook’s supposed 'outside expert’ organization has exactly one full time employee and no other staff, including part time staff or consultants, according to its IRS filing.”
Wednesday’s petition lays out two arguments that seek to demonstrate Facebook’s liability for drug activity on its platform — and its failure to communicate this risk to shareholders.
First, the filing argues that because Facebook runs a money service business, Facebook Pay, the company has to follow federal banking and national security laws about knowing its customers or else face sanctions and fines. However, Facebook did not adequately provide systems that would enable content moderators to communicate about illicit activities, including agreements to transfer payment, on Facebook products, according to the claim. PayPal has previously been fined under those statutes.
Facebook said it couldn’t comment on the claim without more context but that the company has a dedicated team that ensures compliance with rules around knowing your customer.
Second, the petition notes that major pharmaceutical manufacturers, marketers and distributors were recently forced into legal disputes for facilitating the opioid crisis and that Facebook could be in the same position.
Stephen Kohn, a top whistleblower lawyer and founding director of the National Whistleblower Center, who filed the petitions, said the drug activity could draw the interest of the Justice Department because Facebook is “sitting on a massive amount of evidence.” At the same time, Kohn noted, federal lawmakers have looked at revising Section 230 of the Communications Decency Act, the exemption that protects Internet companies from liability from user-generated content. But no definitive legislation has emerged from those discussions.
Correction: Gretchen Peters helped coordinate earlier petitions to the SEC about Facebook’s failure to police wildlife trafficking and stolen antiquities. An earlier version of this story incorrectly stated that Peters helped coordinate a complaint to the SEC — also filed by the National Whistleblower Center — about terrorist networks on Facebook. Peters was not involved in that complaint.