YouTube not liable for cryptocurrency scam, even if Apple founder is victim

Santa Clara County Judge Sunil Kulkarni ruled Thursday that YouTube LLC and Google LLC will not face accountability for cryptocurrency scams that were perpetrated using the companies' video sharing platform. The suit was brought by Apple Inc. co-founder Steve Wozniak and 17 other named plaintiffs from around the world who were victims of the scam and collectively lost hundreds of thousands of dollars.

Kulkarni wrote in his tentative ruling "the public policy supporting [Communications Decency Act] immunity generally overrides a plaintiff's right to discovery where the operative complaint fails to allege any claim avoiding Section 230. ... The operative complaint still does not state a claim that avoids CDA immunity." Wozniak et al. v. YouTube LLC, et al., 20CV370338, (Sup. Ct. Santa Clara, filed Sept. 11, 2020).

Burlingame based attorney Brian Danitz of Cotchett, Pitre & McCarthy LLP is part of the team representing the plaintiffs and said in a phone interview Monday, "This case demonstrates how courts have attributed to Section 230 an absolute immunity that was never intended to protect these large social media companies. Section 230 was originally intended to protect interactive computer services when it decided to take down objectionable material. Now it's being used to allow services like YouTube to profit by presenting objectionable material. It's a misapplication of the law especially where, as here, the content is known criminal activity. Section 230 was never meant to protect websites from profiting from known criminal activity, and that's exactly what's happening here."

In Kulkarni's tentative ruling, he stated that the plaintiffs' claims in the first amended complaint were barred by Section 230. He granted the plaintiffs leave to amend their complaint and plaintiffs moved to lift the initial discovery stay because "they needed evidence within defendants' control to plead around CDA immunity." After plaintiffs submitted their second amended complaint, Kulkarni found in this tentative ruling that their claims still do not avoid YouTube's Section 230 protections and sustained Google's demurrer to the complaint and once again denied plaintiffs' motion to lift the discovery stay.

According to the second amended complaint, this case revolves around a cryptocurrency scam that has been ongoing since at least 2018 and has caused tens of millions of dollars in damages to victims. Scammers hijack YouTube channels and publish videos, which use the likeness of famous tech entrepreneurs such as Steve Wozniak, Elon Musk and Bill Gates, telling people to send their bitcoin to an anonymous wallet during a live broadcast and the broadcaster will return double the amount the viewer sent. According to Danitz, there have been numerous reports from users who had their accounts stolen and Steve Wozniak and his wife have both called YouTube to report these scams, but the company has yet to take action.

Danitz said, "This case is different compared to other Section 230 cases because this matter is YouTube's failure to stop the hijacking of channels, verifying them as authentic, promoting the fraudulent content of the scammers and selling ads to drive traffic to it. All the while knowing that there is this ongoing crypto scam running rampant on its platform. Known criminal conduct because of a security flaw that YouTube has failed to take reasonable measures to correct."

Danitz also referenced a ruling in another court by new 9th U.S. Circuit Court of Appeals Judge Lucy H. Koh when she was an Article III judge: In re: Zoom Video Communications Inc. Privacy Litigation. She wrote in an order that there is a "distinction between content moderation and security failures." In re: Zoom Video Communications Inc. Privacy Litigation, 3:20-cv-02155-LHK, (N.D. Cal., filed March 30, 2020).

In his tentative ruling, Kulkarni wrote, "Plaintiffs' security and design theories still, at bottom, depend on a third party's content, without which no liability could exist. ... Zoom supports, rather than undermines, the conclusion that CDA immunity bars these claims."

Representatives for Google did not respond to emailed requests for comment.