YouTube not liable for cryptocurrency scam

YouTube LLC and its parent Google LLC are not liable for cryptocurrency scams perpetrated by people who hijacked the video-sharing platform, a Santa Clara County judge ruled.

Judge Sunil Kulkarni said the plaintiffs, which included Apple Inc. co-founder Steve Wozniak, failed to provide evidence to clear the hurdle posed by Section 230 of the Communications Decency Act. That's the provision of the law that says internet companies are generally not liable for third-party content posted to their platform. Wozniak et al. v. YouTube LLC, et al., 20CV370338, (Sup. Ct. Santa Clara, filed Sept. 11, 2020)

Kulkarni rejected an analogy between this case and a ruling made by 9th U.S. Circuit Court of Appeals Judge Lucy Koh in the Zoom privacy litigation when she was a federal trial judge in San Jose. Koh allowed plaintiffs whose private conversations were hijacked by outsiders - a practice known as Zoom bombing - to sue Zoom. There is a "distinction between content moderation and security failures," Koh wrote. In re: Zoom Video Communications Inc. Privacy Litigation, 3:20-cv-02155-LHK, (N.D. Cal., filed March 30, 2020).

In the instant case, 18 plaintiffs including Wozniak said scammers have been hijacking YouTube channels and published videos using the likeness of famous tech entrepreneurs such as Wozniak, Elon Musk and Bill Gates to tell viewers to send their bitcoin to an anonymous wallet during a live broadcast promising the broadcaster would return double the amount the viewer sent. The plaintiffs, including Wozniak, said the scamming had been going on since at least 2018 and that YouTube officials had ignored their requests to stop it. Wozniak and his wife both contacted YouTube but got no response, the complaint said.

David H. Kramer of Wilson Sonsini Goodrich & Rosati represents Google. He did not respond to a request for comment on the judge's ruling. In court papers, he wrote that the plaintiffs tried "vainly to camouflage the fact that plaintiffs' case depends entirely upon their having lost money to third party perpetrators of a scam. Plaintiffs are still searching for a way to hold YouTube liable for those losses because YouTube hosted or failed to remove the third parties' scam content from the YouTube service. That is a result that Section 230 squarely forecloses."

Brian Danitz of Cotchett, Pitre & McCarthy LLP represented the plaintiffs. He said in an interview, "This case demonstrates how courts have attributed to Section 230 an absolute immunity that was never intended to protect these large social media companies... 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."

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."

Kulkarni, who had already given the plaintiffs once chance to amend their complaint to add evidence that might get around Section 230, didn't agree. And he expressly rejected the comparison to the Zoom litigation.

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