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Tuesday, April 16, 2024 | Back issues
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Tech entrepreneurs suit against YouTube for bitcoin scams narrowly lives on

A California appeals panel said YouTube's verification badges may be considered its own speech, granting Steve Wozniak and others a chance to take on the video platform for its role widespread scams using their likenesses.

SAN JOSE, Calif. (CN) — Though YouTube can dodge most claims of responsibility for scams taking place on its platform, its channel verification policies may not fall within the Communications Decency Act, a California appellate panel ruled Monday.

Apple co-founder Steve Wozniak and 17 others sued YouTube and Google in Santa Clara County Superior Court in 2020, claiming that the Alphabet properties promote and profit from scam videos that “falsely use images and videos of plaintiff Steve Wozniak, and other famous tech entrepreneurs, and that have defrauded YouTube users out of millions of dollars.”

The plaintiffs said in the their complaint that scammers would solicit cryptocurrency using plaintiffs' likenesses on hijacked YouTube channels by uploading videos that appeared to be of well-known tech entrepreneurs like Wozniak or Elon Musk hosting a bitcoin giveaway to encourage users to send in bitcoin in return for even more cryptocurrency.

A Sixth District Court of Appeal panel in California upheld a majority of a state court judge’s dismissal of claims against YouTube’s handling of these channels hijacked by cryptocurrency scammers. But the three-judge panel also found that YouTube’s creation of verification badges for channels could place its actions outside of the immunity of Section 230 of the Communications Decency Act.

Santa Clara Superior Court Judge Sunil R. Kulkarni previously ruled that the plaintiffs’ claims are barred by Section 230 — which upholds immunity for companies to determine the content allowed on their products, such as social media websites, where users can publish information. 

Associate Justice Charles Edward Wilson, a Newsom appointee, authored the opinion issued Friday, with Justices Allison Danner — a Jerry Brown appointee — and Newsom appointee Daniel Bromberg concurring.

Wilson said that most of the plaintiffs’ claims treat YouTube as a publisher of third-party content, but the claim that YouTube’s own content contributed to the unlawfulness of the scam by providing verification badges to hijacked channels could fall outside the scope of section 230 immunity. 

The panel concluded that while the Communications Decency Act shields interactive computer services as publishers, further proceedings are needed to determine if YouTube created its own content by providing the verification badges, which appeared as check marks next to the hijacked channel's name and suggested that the channel was legitimate.

“As currently pleaded, though, we are unable to conclude that those allegations save any of plaintiffs’ causes of action,” Wilson said. “Nevertheless, because there is a reasonable possibility plaintiffs could cure the defects, we also conclude the trial court abused its discretion in not granting leave to amend the claims related to verification badges.”

To the claim that YouTube allowed scam videos to be published and allowed false representation of how many views those videos had, Wilson said such claims are too conclusory but gave the plaintiffs leave to amend. He said that it could be inferred that YouTube is responsible for creating the information authenticating the channel owner in question with verification badges. 

“Unlike the scam videos themselves, the third-party scammers did not create or develop the verification badges — defendants allegedly did,” he said. “Nor is there any suggestion in the SAC that the verification badges contain information voluntarily provided by users and thus merely redirect or highlight third-party content. We therefore conclude the SAC adequately alleges that under section 230, YouTube is responsible for creating the information in the verification badges.”

Wilson sent the case back to trial court, saying that the plaintiffs did not explain how YouTube’s statements verifying the scam accounts contribute to the illegality of their content or if they demonstrate that the badges played any significant role in conveying false impressions of the videos’ authenticity. 

“We caution that we express no opinion regarding the viability of any claims in a subsequent amended complaint,” the judge wrote. “We limit our conclusion as to the reasonable possibility of amendment solely to the allegations regarding verification badges. We remand for the trial court and the parties to consider the appropriate scope of discovery in light of our decision and subsequent developments in the trial court.”

Attorneys for Google did not immediately respond to requests for comment. 

The plaintiff's attorney Brian Danitz said in an email that the decision recognizes the plaintiffs' demonstration that YouTube is responsible for information in its verification badges, and that they should be able to amend their claims to demonstrate how those badges materially contributed to the fraudulent content.  

“Courts have given Section 230 immunity an extraordinarily broad scope," Danitz said. "This is an important decision recognizing that there are limits to Section 230 immunity. Online platforms, like YouTube, cannot rely on blanket immunity when their own actions and speech materially contribute to the harm suffered by their users.”

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Categories / Appeals, Law, Technology

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