Facebook Sues Over Deceptive Ads Linked to Coronavirus Scams

By Malathi Nayak and Sarah Frier | April 13, 2020

Facebook Inc. sued the founder of a software company for running deceptive advertisements on its social-media platforms, including links to investment scams and bogus information about the coronavirus pandemic.

Basant Gajjar’s “LeadCloak” software, designed to circumvent automated review systems in Facebook and Instagram, baits users into clicking on links that are unrelated to the ad, according to the lawsuit filed Thursday in California. Facebook said the software pushed deceptive ads for diet pills and drugs and cryptocurrency investment scams.

Gajjar, who was named as a defendant in the Facebook suit, didn’t immediately respond to a request for comment. He’s an Indian citizen residing in Thailand, according to the lawsuit.

LeadCloak has also targeted other technology companies including Google, Oath, WordPress and Shopify, Facebook said in its lawsuit.

Facebook has faced a surge in malicious actors seeking to take advantage of users’ desperation during the outbreak. In mid-March, the company banned deceptive ads touting protective masks. In many cases, the masks were faulty, overpriced or counterfeit versions of what physicians recommended.

Still, it’s been difficult for Facebook to remove such ads from its social platforms. The company is relying more on automated systems to solve the problem, because many of its contractors can’t work on the problem from home, for privacy and legal reasons.

Gajjar’s website advises advertisers to block Facebook and Google IP addresses to evade the companies’ review of non-compliant landing pages, Facebook said in its complaint. LeadCloak’s customers can sign up for a “pay-as-you-go” option or pay monthly fees between $399 and $1,999 to use Gajjar’s cloaking service, according to the lawsuit.

Facebook said nearly 4,202 users clicked on an ad from late March showing an “innocuous” landing page promoting stainless steel spoons. It instead took them to “a fake news article that promoted bitcoin investments to counter the economic impact of the COVID-19 pandemic and used the image of a local celebrity,” the company said.

Facebook has asked the court to permanently block LeadCloak services and seeks damages, including compensation for resources spent to identify and stop Gajjar’s “injurious activities.”

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