In a significant legal setback, Meta Platforms has failed in its attempt to dismiss a lawsuit brought by Australian mining magnate Andrew Forrest over Facebook ads featuring deepfakes of him promoting fraudulent cryptocurrency schemes. Citing a section of a 1996 federal law, Meta argued that it should not be held liable for third-party content on its platform. However, a U.S. federal judge found this defense insufficient.

On June 17, California District Judge Casey Pitts ruled that Forrest could refile his lawsuit, aiming to demonstrate that Meta's negligence in preventing the scam ads breached its duty to operate in a "commercially reasonable manner." The lawsuit centers on Facebook ads that used doctored images of Forrest to deceive users into investing in crypto scams.

Meta attempted to leverage Section 230 of the Communications Decency Act, which generally shields providers of "interactive computer services" from being treated as publishers of third-party content. This defense has been used by various tech companies, including YouTube, to avoid liability for similar issues.

However, Judge Pitts determined that Meta had not "established beyond dispute" that Section 230 provided an "airtight affirmative defense" against Forrest’s allegations. This ruling marks a pivotal moment in U.S. civil court, as it challenges the long-standing immunity social media companies have relied on to shield themselves from legal responsibility for the content in their advertising business.

In response to the ruling, Forrest expressed optimism about his case's future prospects. Speaking to The Australian, he stated, "The decision means we can seek to prove in court that Facebook can and should prevent displaying fraudulent ads on its site while refusing to take any responsibility."

Judge Pitts's order allows Forrest to amend his lawsuit to include claims that Meta misappropriated his name and likeness, suggesting that Meta profited more from ads featuring his image than it would have otherwise. Pitts noted that this adequately pleads the alleged misappropriation was to Meta's advantage.

Furthermore, Forrest has accused Meta of playing an active role in creating the ads and determining their audience through its advertiser tools. This involvement, according to the judge, raises a factual dispute about whether Meta's ad systems were neutral tools or if they contributed to the content of the ads.

This legal development follows a decision by Australian prosecutors in April to drop criminal charges against Meta related to the deepfake crypto scam ads, citing insufficient evidence.

Andrew Forrest, the 62-year-old founder of iron ore producer Fortescue Metals Group, has a net worth estimated by Forbes at $16.6 billion. His ongoing legal battle with Meta highlights the growing scrutiny of social media platforms' responsibility for the content they host and their role in preventing fraudulent activities.