- Data research firm Cambridge Analytica got in trouble for allegedly illegitimately gaining access to the personal data of millions of Facebook users.
- The company says it's deleted that data, but that fact is in dispute.
- With the firm now in bankruptcy, that data and the psychological profiles it built from them could be considered to be its key assets, assuming it still has them.
- As such, the data and profiles could be auctioned off to the highest bidder in the bankruptcy process.
With Cambridge Analytica in bankruptcy, one of the things it could potentially sell to settle its debts is the very same thing that got it in trouble in the first place – the user data it gleaned from Facebook.
Cambridge Analytica says it no longer has such data, but that fact is in dispute. If the firm does still have the data or the psychological profiles it created from it, they could be considered some of its primary assets and put up for auction in the bankruptcy process.
"Personal identifiable information in bankruptcy can be sold," said Jim Vincequerra, a partner at law firm Alston and Bird who specializes in bankruptcy law. "It's a defined term in the bankruptcy code, and there is a specific provision that addresses it."
In the US, when companies file for bankruptcy they are required to list their assets, or what exactly the firm owns. If Cambridge Analytica lists any user data or psychological profiles, those assets could be sold to the highest bidder, Vincequerra said. Bankruptcy auctions are open to anyone who can prove they're able to pay the asking price.
But Cambridge Analytica has another option. It could sell or transfer such data to a third party instead of putting it up for auction, Vincequerra said. That possibility is especially concerning for privacy advocates because Cambridge Analytica's executives have set up another company, dubbed Emerdata, which reports indicate is effectively just a rebranded version of the same firm.
"This is a company that has proven that they will weaponize anything they can get their hands on and that's not a company I want having my psycographic profile," said Jeff Pollard, a principal analyst at Forrester, a market research firm.
Cambridge Analytica is at the center of a global debate about data privacy for allegedly breaking Facebook's rules to obtain the personal data of up to 87 million of the social network's users. The company reportedly used the data to create psychological profiles of Facebook users to target them with ads on behalf of the Trump campaign during the 2016 presidential election and on behalf of those advocating that Great Britain should leave the European union ahead of the Brexit vote that same year.
Saying that the increased scrutiny of its business has driven away nearly all of its clients, Cambridge Analytica announced Wednesday it was shutting down and declaring bankruptcy.
"I think what should happen to this information is that it shouldn't exist anymore," Pollard said. "I think we know that in part some of that information was obtained from Facebook and other sources without permission, and they at least stated they had already deleted that information but hadn't."
Cambridge Analytica's bankruptcy could set a new precedent
There are already provisions in existing case law for dealing with consumer data that's held by companies that are going through bankruptcy. Typically, such information is comprised of customer lists or data belonging to clients of the bankrupt company.
But what's unusual in the Cambridge Analytica case is that it potentially has data on people who weren't its clients and didn't have a direct relationship with it. Because of that, it's unclear exactly how an ombudsman might treat such data or whether the ombudsman might block a sale. That issue hasn't been settled by the courts.
Cambridge Analytica isn't the only company that has data on consumers who never directly established a relationship with the firm. So whatever the court decides, it could set a new precedent for future bankruptcy cases.
"That's the thing I've been wrapping by brain around, because I don't think the bankruptcy court has ever confronted an issue like this," Vincequerra said. "If we are confronted with a proposed sale transaction, it'll be interesting to see how the courts deal with this issue. It'll be an interesting case study for the 21st century."
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- Facebook is reportedly researching an ad-free version of its site where people would pay a monthly fee
- Cambridge Analytica is shutting down
- UK lawmakers are prepared to force Facebook CEO Mark Zuckerberg to come and answer their questions