Facebook Accuses Thai Advertiser Of 'Cloaking' Scam

Law360 (April 9, 2020, 10:03 PM EDT) -- A Thai man has been circumventing Facebook's and Instagram's rules by posting seemingly innocuous advertisements for sweaters or kitchen utensils whose links in fact lead to web pages dedicated to cryptocurrency and diet scams, the social media giants said in a breach of contract suit Thursday.

Basant Gajjar, who runs the company LeadCloak, violated Facebook Inc. and Instagram LLC's terms by providing a cloaking technology, starting in March 2016, that helps advertisers dodge the ad review systems, the companies said in a complaint filed in California federal court.

"Defendant's cloaking service was used to cloak the landing pages for hundreds of ads on Facebook directed at Facebook users in the United States and elsewhere," the companies said. "Some of the cloaked landing pages promoted cryptocurrency schemes and diet scams in violation of Facebook's advertising policies and used the images of celebrities."

In September, Gajjar's cloaking service was used to post a Facebook advertisement depicting an Amazon product listing for sweaters, the companies said. But when users clicked through, they were taken to a bogus Fox News page that was hawking dietary supplements and featured images of celebrities.

Last month, the cloaking services delivered an advertisement for a stainless steel spoon, the companies said. When users clicked the link, they were taken to "a fake news article that promoted bitcoin investments to counter the economic impact of the COVID-19 pandemic," the companies claim.

According to Facebook and Instagram, LeadCloak offers packages for prospective scammers starting at $400 per month and ranging up to $2,000 per month. They also offer a per-click payment model, the companies said.

The actions, which violate a number of Instagram's and Facebook's terms and agreements, damaged their reputation, public trust, and goodwill, the companies said.

"Defendant interfered with plaintiffs' service and has negatively impacted the Facebook and Instagram experience for users who viewed and clicked on ads containing landing pages cloaked using his software and service," according to the companies.

The social media companies are asking the court to enjoin Gajjar and his associates from using their platforms or offering up the LeadCloak service.

Gajjar could not be reached for comment Thursday.

Facebook has been using the courts to crackdown on ad-related schemes recently.

In December, it filed suit against a Hong Kong-based advertising company and two Chinese citizens that it says compromised users' accounts to run deceptive ads that often featured celebrities, in a scheme that cost victims more than $4 million.

In a case filed in California federal court, Facebook accused ILikeAd Media International Co., Chen Xiao Cong and Huang Tao of tricking users into installing malware before using compromised accounts to run ads for items that included counterfeit goods and diet pills. Cong developed the malware, which Tao promoted and spread online by including it as part of a browser extension, a piece of software used to customize someone's web browser, the court filing says.

In August, it accused two app developers of peddling Android apps that create fake user clicks on Facebook ads without users' knowledge and allow the developers to wrongly generate more advertising revenue, in a suit the social media giant called "one of the first of its kind against this practice."

Hong Kong-based LionMobi and Singapore-based JediMobi "deceived their users" into installing the "click injection" apps, which are available on the Google Play store, Facebook said in a 28-page complaint filed in California federal court. The apps infect users' devices with a malware that gives the false impression that real people clicked on ads delivered to the users' devices, the company said.

Facebook and Instagram are represented by Ann Marie Mortimer, Jason J. Kim, and Jeff R. R. Nelson of Hunton Andrews Kurth LLP.

Counsel for Gajjar was not immediately known Thursday.

The case is Facebook, Inc. et al v. Gajjar, case number 3:20-cv-02429, in the U.S. District Court for the Northern District of California.

--Additional reporting by Ben Kochman and Hailey Konnath. Editing by Peter Rozovsky.

For a reprint of this article, please contact reprints@law360.com.

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Case Information

Case Title

Facebook, Inc. et al v. Gajjar


Case Number

3:20-cv-02429

Court

California Northern

Nature of Suit

Contract: Other

Judge

Kandis A. Westmore

Date Filed

April 09, 2020

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