Metropolitan News-Enterprise


Tuesday, March 19, 2024


Page 1


Court of Appeal:

YouTube, Google Might Be Liable for Cryptocurrency Scam

Complaint Presently Is Infirm, Opinion Says, but Cause of Action Might Be Drafted Based on YouTube Vouching for Legitimacy of Channels That Have Been Hijacked and Contain Fake Videos Simulating Live Give-Aways


By a MetNews Staff Writer


—Gage Skidmore


Apple co-founder

YouTube and its owner, Google, could be liable to victims of a scam under which legitimate channels are highjacked and gullible users are tricked into transmitting cryptocurrency to the perpetrator’s account upon the representation that twice the amount sent will be returned, under a Court of Appeal opinion filed yesterday, but with the proviso that the pleading be retooled to link YouTube’s conduct to the harm suffered.

The lead plaintiff, electronics engineer Steve Wozniak—known as “Woz”—is co-founder of Apple, Inc. His website was hijacked. There are 17 others who were duped by fake videos, believing that they were viewing live “bitcoin giveaway” purportedly hosted by the likes of Bill Gates, Elon Musk, or Wozniak, and that they could double their money—while, in fact, they lost whatever they paid.

Santa Clara Superior Court Judge Sunil R. Kulkarni sustained demurrers to all causes of action in the second amended complaint (“SAC”) without leave to amend, and a judgment of dismissal ensued. The judge found that all causes of action are barred by the federal Communications Decency Act of 1996, 47 U.S.C. §230.

§230’s Provisions

Sec. 230 provides, in part:

“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

The statute defines an “information content provider” as “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service.”

It specifies:

“No cause of action may be brought, and no liability may be imposed under any State or local law that is inconsistent with this section.”

Wilson’s Opinion

Justice Charles Edward Wilson said in yesterday’s opinion that one cause of action—based on the allegation that YouTube itself caused harm by vouching for the reliability of channels that had, in fact, been taken over by cyberpirates—might be salvageable.

He said that while an interactive computer service—such as YouTube—is not liable, under §230, for content posted by a third party, “in certain instances where website operators either create their own information or require users to supply information specified by the website, courts have held the operators responsible.”

The SAC alleges:

“YOUTUBE has continued to maintain the verification of channels that have been hijacked to broadcast BITCOIN GIVEAWAY scam videos and, in at least one instance, even issued a verification badge to a channel at the very time it was actively broadcasting scam videos.”

It goes on to say:

 “When YOUTUBE verifies a channel, YOUTUBE is communicating to its users that ‘it’s the official channel of a creator, artist, company, or public figure,’ and that the channel ‘represent[s] the real creator, brand, or entity it claims to be’ because YOUTUBE has ‘check[ed] different factors to help verify [the channel owner’s] identity.’ YOUTUBE also verifies channels to ‘distinguish official channels from other channels with similar names.’ ”

Some of the plaintiffs averred that they relied upon the verification to their detriment.

Verification Badges

Wilson wrote:

“It can reasonably be inferred from these allegations that YouTube is wholly responsible for creating the information concerning the authenticity of the channel owners in the verification badges. Unlike the scam videos themselves, the third-party scammers did not create or develop the verification badges—defendants allegedly did. 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.”

He continued:

“Despite these allegations, we cannot conclude that defendants are ‘information content providers’ within the meaning of section 230 because the SAC, as currently pleaded, does not adequately allege that the information for which defendants are responsible gives rise to their asserted liability or materially contributed to the illegality of the conduct at issue.”

Further Amending

The jurist declared, however, that “the SAC’s allegations regarding verification badges are sufficient to justify granting plaintiffs leave to amend, because there is a reasonable possibility that the infirmities we have discussed can be cured by amendment.”

Demurrers to other causes of action were properly sustained, Wilson said, because they all related to harm caused by third parties’ posting of content.

The case is Wozniak et al. v. YouTube, LLC, 2024 S.O.S. 1007.


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