First on CNN: NY Attorney General targets fake social media activity

New York Attorney Letitia James during an inauguration ceremony in New York.

New York (CNN Business)A company that brought in millions of dollars in revenue by creating fake social media posts and comments has settled a case with the state of New York after a probe exposed its activities. It's the first finding by a law enforcement agency indicating that such activity constitutes illegal deception and illegal impersonation, according to the state's top attorney.

The New York Attorney General's office is making it clear that, in its view, selling fake social media activity in the state is illegal. Attorney General Letitia James has announced a first-of-its-kind settlement with the now-defunct company Devumi, which sold fake followers, "likes" and views on platforms such as Twitter, YouTube, LinkedIn, SoundCloud and Pinterest, using activity from fake accounts.
According to the settlement, Devumi's customers included movie and television actors, musicians, businesspeople, politicians, pundits and commentators, athletes, academics, modeling agencies, marketing and public relations professionals and adult film stars -- all of whom hoped to show that they, their ideas or their products were more popular than they actually were.The settlement between Devumi and the state of New York does not address whether the activity of Devumi's customers is also illegal.
"Bots and other fake accounts have been running rampant on social media platforms, often stealing real people's identities to carry out fraud," James said in a statement. "As people and companies like Devumi continue to make a quick buck by lying to honest Americans, my office will continue to find and stop anyone who sells online deception. With this settlement, we are sending a clear message that anyone profiting off of deception and impersonation is breaking the law and will be held accountable."
    From 2015 through 2017, according to the settlement, Devumi LLC and other companies owned by German Calas , Jr. — including DisruptX Inc., Social Bull Inc. and Bytion Inc. — made approximately 250,000 sales of social media activity and endorsements -- to customers who hoped to increase their following and create a buzz around themselves. For instance, the company sold Twitter followers in packages of up to 500,000 for $3,997 and likes and shares in packages costing up to $228 per year. YouTube subscribers were sold in packages of 100 for $29 and likes on the video-sharing service were sold in packages starting at $30 for 250 likes.
    The company earned approximately $15 million in revenue selling this fake social media activity, according to the settlement. Calas neither admitted nor denied the attorney general's findings as part of the settlement. Calas must pay $50,000 to the state of New York to cover the costs and fees incurred by the state in its probe, but neither he nor the company will face any additional penalties. Calas submitted to the attorney general's office last week a financial statement "documenting and certifying" his "reduced financial circumstances under penalty of perjury."
    Calas could not be reached for comment. His lawyer did not respond to repeated requests for comment.
    Calas denied the allegations to the New York Times, which published an expose on the company in January of last year.
    The state's attorney said the online activity Devumi sold came from fake accounts operated by computers — known as bots — or by one person pretending to be many other people, known as sock-puppet accounts. Some activity even came from fake accounts that copied real people's social media pictures and profiles without the knowledge or consent of the user whose identity was copied.
    The company also sold recommendations from real social media "influencers" without disclosing the influencers had been paid for their recommendations.
    For example, on a website that customers used to buy mentions on Twitter, the company included a text field for customers to fill in and the following instruction: "Enter up to 3 custom tweets you would like the influencer to tweet. Eg. Check out @Devumi for the best social media marketing tips."
    The settlement says Devumi's deceptive business practices also misled many of their customers "who erroneously believed they were paying for authentic endorsements, although other customers knew that they were buying fake endorsements. These practices also deceived the social media platforms, which prohibited the activity."
      While ‎the internet has been around for years, the legal framework for regulating online activity has often failed to keep up with the fast pace of development. This settlement makes clear that practices like Devumi's are illegal under New York law and will be punished.
      The negative publicity that followed the report led to a steep decline in its business and the company ceased operations by October 2018, according to the settlement. The settlement prohibits Devumi and Calas from engaging in any of the same conduct in the future. While Devumi will not have to pay a fine, future perpetrators of this kind of illegal activity could face financial penalties, according to the attorney general's office.