Cambridge Analytica files for bankruptcy
July 2018 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING
Financier Worldwide Magazine
July 2018 Issue
Cambridge Analytica, the company at the heart of the Facebook data sharing scandal, and which worked on Donald Trump’s presidential campaign, filed for Chapter 7 bankruptcy protection at the US Bankruptcy Court Southern District of New York. The filing also includes the firm’s subsidiaries, SCL Elections Ltd, SCL USA Inc and SCL Social Ltd.
The company announced its intention to close in early May following allegations that it had misused the data of millions of Facebook users. The company’s bankruptcy filing came on 18 May when its number of creditors was listed as between one and 49, with Facebook, Target and Google listed, though there the company did not specify the size or type of claims they had. The company also estimated that it had assets between $100,001 and $500,000 and estimated liabilities of $1,000,001 and $10m.
On 2 May, the company, when reporting its closure, maintained that it had done nothing wrong. “Over the past several months, Cambridge Analytica has been the subject of numerous unfounded accusations and, despite the company’s efforts to correct the record, has been vilified for activities that are not only legal, but also widely accepted as a standard component of online advertising in both the political and commercial arenas”, it said in the statement. The company claimed it had “unwavering confidence that its employees have acted ethically and lawfully”. Instead, its closure was blamed on a “siege of media coverage” which had driven its customers and suppliers away. “As a result, it has been determined that it is no longer viable to continue operating the business, which left Cambridge Analytica with no realistic alternative to placing the Company into administration”, the company’s statement said.
Cambridge Analytica first entered the public consciousness in March when a whistleblower revealed how the company extracted data from Facebook through a quiz app and used it to influence voters. The revelations not only sparked a probe by Congress into Facebook’s privacy and data collection policies but also launched a number of lawsuits in the US, including some class actions against both Facebook and Cambridge Analytica over the ways customer data was obtained and handled.
After the allegations against Cambridge Analytica came to light, the company and its parent group soon attracted further scrutiny when its director, Alexander Nix, was filmed by reporters who were posing as prospective clients.
Cambridge Analytica, which was founded in 2013 initially with a focus on US elections, has also filed for insolvency in the UK, appointing Crowe Clark Whitehill LLP to act as its independent administrator.
The company also appointed Julian Malins QC to conduct an investigation into the allegations surrounding the company’s operations. Mr Malins concluded that the allegations were not “borne out by the facts”. He added: “I had full access to all members of staff and documents in the preparation of my report. My findings entirely reflect the amazement of the staff, on watching the television programmes and reading the sensationalistic reporting, that any of these media outlets could have been talking about the company for which they worked. Nothing of what they heard or read resonated with what they actually did for a living.”
Irrespective of the decision to close the company, investigations into Cambridge Analytica’s conduct will continue. In the US, the Justice Department and the FBI are believed to be investigating the company. The UK’s Information Commissioner’s Office has also ordered Cambridge Analytica to provide data on a US voter in a test case to see whether foreign nationals can access their data under UK law. Failure to cooperate with the UK authorities could see the firm violate an enforcement notice and face criminal action.
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