Data scandal: US$37bln wiped from Facebook as tech stocks drop

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37 billion US dollars were wiped off the value of Facebook on Monday after its biggest one-day drop on Wall Street in four years, as further details emerged of a scandal that reportedly saw the data of 50 million users leaked for political purposes.

A joint undercover investigation by UK and US media claims British data analysis company Cambridge Analytica used the information for activities connected to US President Donald Trump’s 2016 election campaign.

Several reports suggest Trump’s team used the data during the primaries in 2016, but not the general election. Cambridge Analytica allegedly received 5.9 million US dollars from Trump’s campaign in 2016.

The latest revelation by British broadcaster Channel 4 featured recorded audio of Cambridge Analytica chief executive Alexander Nix claiming his company could secretly film politicians being offered bribes and women, before releasing the footage online.

“We’ll offer a large amount of money to the candidate, to finance his campaign in exchange for land for instance, we’ll have the whole thing recorded, we’ll blank out the face of our guy and we post it on the internet,” Nix can be heard saying.

Pressure has been building on Facebook CEO and founder Mark Zuckerberg, who has so far remained silent on the issue, despite his own personal wealth plummeting five billion US dollars on Monday.

Facebook founder and CEO Mark Zuckerberg has remained silent on the latest scandal to face his company. /VCG Photo

On Tuesday Facebook’s chief information security officer Alex Stamos confirmed he would quit his role by August, with the company confirming he was no longer responsible for countering government-sponsored fake news campaigns.

It remains unclear whether Stamos’ departure is linked to the Cambridge Analytica scandal, or to a reported conflict within Facebook over investigating Russian involvement in the 2016 US presidential election.

Facebook’s shares fell by 6.8 percent on Monday, having a knock-on effect on other tech firms in the “FAANG” group. Amazon, Apple and Netflix saw losses of around 1.5 percent, while Google parent company Alphabet dropped 3.2 percent.

Tuesday morning trading in Hong Kong and Japan saw the Hang Seng and Nikkei indices suffer initial drops before eventually recovering slightly, as investors feared an end to the recent boom in FAANG stocks. This latest case has sparked speculation that tech companies will soon face much greater regulation on their use of private data.

CEO of Cambridge Analytica, Alexander Nix, speaks during the Web Summit, Europe's biggest tech conference, in Lisbon, Portugal, November 9, 2017. /VCG Photo‍

Several high-profile members of the Facebook management team including Stamos have taken to Twitter to deny that the Cambridge Analytica case amounted to a data breach, insisting that the users had agreed to terms and conditions of third parties.

Facebook executive Andrew Bosworth insisted on Twitter that “no systems were infiltrated, no passwords or information were stolen or hacked.”

According to CNBC, while the executives might have an argument, they are missing the point when it comes to user trust, with “a growing sense that Facebook has become creepy instead of fun.”

CNN suggested that several users are calling for a boycott of the company, which has a market cap of almost 500 billion US dollars. Data revealed by Facebook in January showed that in the last quarter of 2017, user numbers in North America dropped for the first time ever .