On Wednesday, New York Attorney General Letitia James announced a $50,000 settlement with Devumi LLC, a Colorado-based company owned by German Calas that sold fake social media engagement and followers to clients. The settlement was the result of a probe into the German Calas group for evidence of the sale of fake endorsements on social platforms including Twitter, YouTube, and LinkedIn, among others.
Devumi and its associated entities stopped operating last fall, shortly after former Attorney General Eric Schneiderman opened the probe in response to a revealing New York Times piece about the company. Its hundreds of thousands of clients included actors, athletes, models, and other figures seeking to boost their social media profiles. In Devumi’s brief lifespan from 2015 to 2017, it generated about $15 million of revenue from using bots and puppet accounts to sell engagement to users.
While the settlement may not be monetarily significant, it marks the first instance in which a law enforcement agency has successfully taken action against fraudulent social media activity. James stated that the company violated New York state law by committing fraud and providing false advertising, emphasizing that she “will continue to find and stop anyone who sells online deception.” James continued, “With this settlement, we are sending a clear message that anyone profiting off of deception and impersonation is breaking the law and will be held accountable.”
New York consumer laws broadly define false advertising as “any advertising that is misleading in any significant way,” which may consist of fooling customers about the product’s price or quality, or leaving out certain crucial information. While some Devumi customers were aware that their social boost was artificial, Devumi neglected to disclose this up-front. As for fraud, Devumi’s social accounts blatantly partook in falsifying identities and monetizing them.
Additionally, Devumi was found to have been selling influencer endorsements without disclosing that they were paid advertisements, which is against Federal Trade Commission (FTC) regulations. Any social media account that is paid to promote a product or service must somehow indicate that the post is a promotion: on Instagram, celebrities will tag posts “#paid” or “#ad”, while others may designate the post as “Sponsored.”
Social media is still largely the Wild West in terms of legal regulations. Companies like Facebook, Twitter, and Instagram often dodge the legal responsibilities of publishers by defining themselves as platforms – since the company itself does not create and distribute the content, but rather provides an interface for individuals to do so themselves, it is generally not liable for the substance of each profile, post, or tweet. The extent to which platforms are obligated to censor or moderate certain content is still hotly debated, often invoking First Amendment rights of individuals. And while the New York state probe did not directly address the responsibilities of platforms or users, Wednesday’s settlement offers legal precedence for accountability in how certain companies monetize these platforms and users.