Hutt directors being sued by Instagram and Facebook boasted about working with Hyundai and Lime

STUFF
Three directors from Hutt Valley are named in a Facebook lawsuit seeking US$10 million in damages.

An Upper Hutt company being pursued by Facebook in a US$10 million lawsuit for allegedly selling "fake likes" also fabricated a customer testimonial and lied about having worked with major international companies on its website.

In late April three New Zealand directors of Social Media Series were named as defendants in a lawsuit filed by the social media giant in a California court.

Arend Alexander Hubert Nollen of Upper Hutt and Leon Francis Hedges and David James Pekka Pasanen of Lower Hutt are accused of using bots to generate millions of fake likes, as well as artificial followers on Facebook's photo and video sharing subsidiary Instagram.

The lawsuit said the men set up three websites to sell fake engagement services and enriched themselves by breaching Facebook and Instagram's terms and conditions.

READ MORE:
* Facebook files lawsuit in the US against Upper Hutt company, alleging Instagram fraud
* Facebook seeks US$10m damages and jury trial against Upper Hutt trio
* Facebook looking to make an example of Upper Hutt social media bot company, lawyer says

Facebook is a social networking site with about 1.5 billion daily users. Instagram is a subsidiary of Facebook, which allows its more than 1 billion active accounts to post, view, comment on, and like photos and videos shared by others.

Facebook is now seeking US$9.4m (NZ$14.3m) in damages, attorney fees and other damages, if proven at trial.

Mark Zuckerberg's Facebook is suing three New Zealand directors for enriching themselves by breaching its subsidiary Instagram's terms and conditions.
AP
Mark Zuckerberg's Facebook is suing three New Zealand directors for enriching themselves by breaching its subsidiary Instagram's terms and conditions.

Stuff has attempted to contact the three men, including visiting their addresses listed in the Companies Office records.

A phone call to Nollen was answered by a woman who offered to pass on the request for comment to him, but Nollen has not responded.

When Stuff visited Pasanen's address a man answered the door who denied he was David Pasanen.

Hedges lives in a gated community and could not be contacted.

​Nollen, Hedges and Pasanen set up a website Likesocial.co, using their New Zealand-registered company Social Media Series, Facebook said.

Nollen and Hedges also set up SocialEnvy.co and IGFamous.co using another New Zealand-registered company Social Envy, it said.

All three websites have been shut down since since the lawsuit was filed.

However, using an internet archive tool it's possible to see what was featured on the websites.

SocialEnvy.co claimed it "helped companies across some of the most revered VC's (venture capitalists)". It featured the brands of five international companies including Hyundai and LimeBike, the company behind Lime scooters.

The Hyundai logo linked through to Hyundai's Puerto Rico website.

The men allegedly used thousands of Instagram accounts to generate fake likes.
AP
The men allegedly used thousands of Instagram accounts to generate fake likes.

Both Hyundai Puerto Rico and Lime said they had never worked with a company called Social Envy.

Both Social Media Series and Social Envy are registered to an address in Clouston Park, Upper Hutt, according to Companies Office records.

​Nollen bought the 1011-square-metre property, with two other people, in 2018 for $835,000.

The same three people also paid $625,000 for a 662sqm Picton property last year and $145,000 for an 800sqm property in Te Anau in February.

Hedges bought his Upper Hutt property with two others in 2017 for $700,000.

Pasanen lives in a 1930s Waiwhetu state house owned by Housing New Zealand.

The lawsuit

The Facebook lawsuit outlines in elaborate detail how the defendants allegedly repeatedly interfered with Instagram's service, profited off creating an unauthentic experience for Instagram users and attempted to fraudulently influence Instagram users.

The 18-page document, filed in a San Francisco court names Facebook and Instagram as the plaintiffs, and demands for a jury trial.

It alleges that since mid-2015 the men operated various websites offering fake engagement services which artificially inflated the likes, views, and followers of Instagram accounts.

A network of computers, or "bots", were allegedly used to deliver automated likes to the instagram accounts of customers.

This is in violation of Instagram's terms of use, community guidelines, and California and federal law.

Each of the three defendants personally used Instagram and Social Media Series used thousands of Instagram accounts, it is alleged.

Facebook and Instagram took multiple enforcement actions against the men for violating Instagram's rules, including sending cease and desist letters and disabling associated Instagram accounts.

The trio stopped offering fake engagement services on one website, only to start selling fake engagement services on another, it is alleged.

Facebook and Instagram also blocked millions of artificial likes originating from the mens' service and disabled accounts associated with them.

Likesocial.co charged a fixed weekly price for its services ranging from $10 per week for 50 likes, to $99 for 2000 per week.

The lawsuit details how in November, after buying 500 likes on Likesocial.co an Instagram user posted a photo of an empty gym on their Instagram account.

The account had no followers and the photo had no comments but the post still received about 500 likes within seconds.

All the likes came from the men's network of Instagram accounts using two internet service providers in Turkey, Facebook alleges.

A man answered the door at the address registered to David Pasanen, but denied he was Pasanen.
KEVIN STENT/STUFF
A man answered the door at the address registered to David Pasanen, but denied he was Pasanen.

They used a network of thousands of Instagram accounts to deliver the likes.

The lawsuit lays out four causes of action: breach of contract, California penal code, computer fraud and unjust enrichment.

Fabricated testimonial

SocialEnvy features several testimonials from supposed clients.

It quotes a New Zealand company owner as saying SocialEnvy was an "amazing company" and he "couldn't recommend them more".

Stuff spoke to the business owner who said he had never supplied a testimonial or feedback to SocialEnvy.

The entrepreneur, who did not want to be named, said someone from SocialEnvy contacted his business in early 2018 offering a low-cost trial to increase its social media engagement.

"They kind of pressured us [into] a little trial."

He said he signed his company up for a month's trial and during that time noticed a small increase in Instagram followers.

However, the followers were all from overseas accounts ,which he found "quite strange".

David James Pekka Pasanen is listed as living at this Lower Hutt state house.
KEVIN STENT/STUFF
David James Pekka Pasanen is listed as living at this Lower Hutt state house.

"At first it sounded like a great plan and then it didn't feel like an authentic product."

He did not have any more dealings with SocialEnvy after the trial because, if anything, it was doing his brand damage, he said.

"It just didn't feel right. It became more and more apparent that it wasn't the best thing to do."

Who buys likes?

People buy likes to boost their online influence.

By gaining followers and likes users appear more popular, which increases their chances of attracting money and freebies from companies looking to promote their brands.

IGFamous.net had packages starting from $39 per month for 10 new followers a day to up to $299 per month for 250 new followers a day.

Leon Francis Hedges has his address registered to this gated community in Upper Hutt.
KEVIN STENT/STUFF
Leon Francis Hedges has his address registered to this gated community in Upper Hutt.

Another company selling fake likes is Viplikes.nz, which labels itself as "the best site in New Zealand to buy real Instagram followers, Facebook likes and other services".

It says its address is 2 Taranaki St, Wellington, but the company says in its terms and conditions the entity is incorporated and registered under the laws of Estonia.

Why target an NZ company?

Lawyer Chris Patterson, who is not involved in the lawsuit but has experience in the area, said Facebook would be looking to make an example of the New Zealand men.

Georgia McGillivray and Justin Clark set up The Social Club to help companies work with influencers.
SUPPLIED
Georgia McGillivray and Justin Clark set up The Social Club to help companies work with influencers.

The lawsuit was based on California state law and was a civil suit which meant prison or extradition to the United States was not an option.

If Facebook was successful in the US court it would then look to get the ruling registered in New Zealand as a High Court of New Zealand judgment, he said.

What the social experts say

The Social Club chief executive Georgia McGillivray said buying fake engagement and followers had become less common over the past year as people became more savvy at spotting fakes.

But she knew of brands and influencers who were still buying followers and engagements.

"The social platforms have also been doing clean-ups to remove inactive accounts, which has seen many accounts lose thousands of followers overnight," McGillivray said.

Buying followers or engagements was not an effective way of increasing influence, she said.

"Fake followers and engagement are 100 per cent fake, so there is nobody to influence."

Engaging with "like farms", bots or any third party software connecting to the social platforms was risky, she said.

"The social platforms are shutting them down and identifying accounts who have been using these tools, and blocking or suspending their accounts."

The Social Club works with more than 9000 influencers, most of whom would have a small percentage of fake followers.

"[For] the majority of the time this isn't because they have purchased them, but because these bots have followed them with the hope of them following back."

The Social Club vetted influencers for a number of things including fake followers and engagements before they were signed up, she said.

"They won't be approved into the community if their fake followers or engagements is over a certain threshold."

Dallas Gurney of marketing agency Drum said the company used digital tools to spot frauds by breaking down an influencer's audience in detail.

"It's pretty easy to tell something is whiffy, for example, when a local influencer has 90 per cent of their following outside of New Zealand," Gurney said.

Brands needed to be careful about jumping to do influencer campaigns because it's the "hot thing" to do, he said.

Stuff