The big news this week has been Facebook filing lawsuits against MaxBounty, Steven Richter and Jason Swan, the CTO of CPALead. The allegations are serious and include violations of CAN-SPAM, fraud and breach of contract among others. Facebook is breaking fresh ground with these actions, and the word on the ground is that the people involved are taking them very seriously.
We’ll get into the details of the lawsuits in a moment, but the interesting thing is what it means for networks. Facebook claims that MaxBounty “conspired with, instructed and encouraged” affiliates to carry out these kinds of deceptive and fraudulent schemes, but that is language that any competent attorney could use to describe the normal, day-to-day activities of a network.
If an affiliate manager sends out an innocent email to a publisher who is sending fake traffic, the email could still potentially be characterized by a lawyer as conspiring, instructing and encouraging the publisher in his actions. That’s what attorneys do. But given that Facebook relies on networks for a large proportion of its income from apps and games, they must have a reason for picking on CPALead and MaxBounty.
Presumably, they must either have hard evidence of wrong-doing, or they’re just using the lawsuit to put pressure on the networks concerned to give up details of scammy publishers. That seems like a real possibility and might prove a useful negotiating point later in the legal process.
It should be noted also that these are just allegations and that MaxBounty has sent out an email stating unequivocably that the allegations are false and that, “we expect this matter will be resolved promptly, amicably, and without any disruption to MaxBounty’s business for advertisers or affiliates.” We like the guys at MaxBounty and we are keeping our fingers crossed that that’s true.
The roots of the lawsuits lie in back at the beginning of this year when there was a sudden surge of fake Facebook accounts and pages being set up that used deceptive offers to persuade people to click on various buttons and links. Clicking on the relevant buttons enabled redirection to external landing pages, or initiated a script that proceeded to spam all a user’s Facebook friends.
Our understanding is that the basis of Facebook’s case against MaxBounty is that:
– Users were deceived by fake Facebook accounts and pages and were subsequently redirected to lead-generating offers sites;
– the redirect to the offers site went via a MaxBounty-owned domain;
– MaxBounty deceived affiliates by claiming that the campaigns concerned were approved by Facebook;
– MaxBounty also provided assistance in creating the relevant Facebook pages and edited the content before they were distributed.
The specific case they describe shows how Facebook users were offered a $250 gift card to “Fan” a page, invite their friends to do the same and then go through a short registration process. Users were then redirected to a third-party offers site where they needed to accept 13 different offers in order to receive the gift card.
The case against Steven Richter describes offers to users to upgrade to a non-existent “Facebook Gold” account, or for Farmville currency and in-game goods if they “Liked” the page and clicked on a button.
In the suit against Jason Swan, the CTO of CPALead (much of this case seems to revolve around them – Steven Richter is named specifically in his suit as an affiliate of CPALead), the deceived user clicked a button which then brought up a fake Facebook security survey. This eventually led to the user being signed up to mobile subscription services via an Auto-Fill form, complete with Facebook logo. CPALead specializes in lead-generation from quizzes and surveys, so it certainly seems likely that their CTO might have known how to use Facebook applications for this kind of scam.
In closing, we must point out that the Steven Richter of New York named in Facebook’s lawsuit is not the person of the same name associated with Media Breakaway and affiliate.com. It is simply an unfortunate coincidence that they share a moniker.