Ernst & Young sued for SEK 240 million for failing to audit Facebook correctly

On Thursday, March 21, 2024, Swedish legal representative Lars Olofsson filed a class action lawsuit against globally known accounting firm, Ernst & Young in the Stockholm District Court.

Olofsson represents 514 victims who have been deceived by ads published on Facebook in an cannabis investment Ponzi scheme run by the Russian mafia called Juicy Fields.

“What we are doing with this case is demanding Ernst & Young take responsibility for the fact that the auditor Börje Andersson Berglund did not audit the company correctly according to the Swedish corporate acidification code,” said Olofsson. “Facebook, as a domestically domiciled company in Sweden, must be in compliance with this law, which mandates that a company must ensure that it is not involved in criminal activities.”

Because the fraudulent ads were published on the network and because Facebook did not remove them when Facebook users reported them as fraudulent ads, the auditor failed in properly reviewing Facebook’s internal activities which clearly and provably can be shown to have failed to prevent the company from being involved in criminal activities.

Part of this responsibility is indeed Facebook’s. However, some of this also lies with the auditor. When the auditor did not criticize Facebook for failing to remove said ads and the subsequent and provable association with criminals in its audit report, it too failed in its special duty of care required by law of such auditing firms.

As a result, Olofsson is claiming damages for his clients for E&Y’s negligence which amounts to his clients losses (SEK 240 million/USD$ 23 million, €21 million.

On Monday, March 25, 2024, the Stockholm District Court decided to transfer the case to Nacka District Court, which is the district court that handles class actions and is specially appointed for this type of legal process.

The case against Ernst & Young has been assigned Case Number T5369-24.

Olofsson has submitted extensive evidence to the court, collected over a period of two years during an international investigation. This evidence clearly shows that Facebook, despite repeated promises, does not have a system to prevent fraudulent ads from being published by third parties on its platform.

The evidence also includes information that Facebook blocks the ability of Facebook users to report fraudulent ads if they have done so multiple times. There is also evidence that Facebook is threatening Facebook users with account suspension if they continue to report fraudulent ads.

Facebook is a public company listed on several global stock exchanges, and as such the company must follow specific rules to ensure that the company is not involved in criminal activities, or that its services could be exploited by criminals.

As required by law, the company's auditor is required to audit the company based on these regulations and include the results in their audit report, which in this case, Ernst and Young clearly failed to do.

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In 2023, Facebook had a total turnover of USD$135 billion, which was an increase of 25%, year over year. Their annual profit was USD$39 billion, which was an increase of 70% over the previous financial year. This was also a record year in terms of sales and profit for Facebook.

Facebook Sweden AB, the domestically domiciled form of the company is overseen by Swedish lawyer, Klas Wennström, who serves not only as a partner in the law firm Mannheimer Swartling, but also as Chairman of the Board of Facebook Sweden AB. The company has no appointed CEO, which means that the Board also has operational responsibility for the business. Facebook Sweden has about 70 domestic employees, with sales of about USD$ 460 million per annum.

The criminals who advertised on Facebook in this case are directly linked to the Russian mafia, which in turn is a close ally of the Russian security service, the FSB. “We have extensive evidence that the criminals also carried out significant money laundering and terror/war financing in this case,” said Olofsson.

The criminals who advertised on Facebook in this case have also defrauded a total of about 125,000 people all over the world, who together have lost more than USD $3 billion.