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Facebook to pay massive fines in settlement with FTC, SEC

Social media giant will cough up serious change for Cambridge Analytica debacle

It’s been a rough year for Facebook as the world’s largest social media platform has been forced to answer for its beach of its users’ privacy by allowing Cambridge Analytica to access personal information without consent.

On Wednesday, the company was slapped with two separate fines for the debacle, agreeing to massive payouts to the Federal Trade Commission and the Securities Exchange Commission to make amends.

The deal with the FTC will have Facebook shelling out a record-breaking $5 billion fine that will end its investigation into the company for gathering the personal data of 87 million users without permission.

The FTC’s investigation concluded that Facebook misled users when it told them in 2014 that it would no longer collect their private information without consent, but continued to allow contracted third parties to collect data from friends of users who had downloaded their apps.

"Facebook betrayed the trust of its users and deceived them about their ability to control their personal information," FTC Chairman Joe Simons said. "The enormity of this penalty resets the baseline for privacy cases and serves as an important deterrent for future violations."

In addition to the fine, Facebook as agreed to create an “independent privacy committee” and to review every new product or service it offers to ensure it maintains user privacy.

Facebook has also had to answer to the SEC for its actions, agreeing Wednesday to pay a $100 million fine for misleading investors about the risks the company was facing as a result of the privacy breach.

According to the SEC, Facebook presented the risk of data misuse are a mere hypothetical in public disclosures to investors for more than two years, when in fact it knew that a third-party developer had misused its data.

“Public companies must accurately describe the material risks to their business,” said Stephanie Avakian, co-director of the SEC’s Enforcement Division.  “As alleged in our complaint, Facebook presented the risk of misuse of user data as hypothetical when they knew user data had in fact been misused. Public companies must have procedures in place to make accurate disclosures about material business risks.”

But the massive fines won’t bring Facebook’s legal battles to an end.

Both the state of New York and the Department of Housing and Urban Development are investigating the company for housing discrimination, alleging that its advertising platform allows advertisers to modify or block ads using ZIP code information to exclude consumers based on race, color, national origin, religion, familial status, sex and disability, among other classifications.

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