Cambridge Analytica shutting down in wake of Facebook data crisis

Mike Snider | USA TODAY

Show Caption Hide Caption How Cambridge Analytica, Facebook swayed the 2016 election Here's how a data firm helped Donald Trump get elected as president. We have the FAQs.

Cambridge Analytica, the political ad marketing firm that worked for President Trump and was involved in the misappropriation of 87 million Facebook users' data, is closing its offices.

The specialist in political predictions announced that bankruptcy proceedings will begin in the U.S., as well as insolvency proceedings in the U.K, where the firm has an office and where its parent company The SCL Group is based.



“Over the past several months, Cambridge Analytica has been the subject of numerous unfounded accusations and, despite the Company’s efforts to correct the record, has been vilified for activities that are not only legal, but also widely accepted as a standard component of online advertising in both the political and commercial arenas,” the company said in a statement Wednesday.

The company came to public attention in March when Facebook announced — on the eve of two explosive newspaper reports in The New York Times and the U.K.'s Observer — it had learned Cambridge Analytica and its parent company had failed to delete personal data that the social network knew it had improperly obtained on Facebook users three years ago.

Cambridge, according to Facebook, had obtained the data from Aleksandr Kogan, a researcher at the University of Cambridge. A personality research app he created gathered the personal information on 270,000 Facebook users, as well as data on those users' friends, amplifying the reach to the tens of millions when it passed that data to Cambridge for a voter targeting scheme.

Facebook said it thought Cambridge had deleted the data, but the Times' and Observer reports cited former employees and documents that the data was used to target voters during the 2016 presidential election. The disclosures forced Facebook into crisis mode as regulators and lawmakers clamored for an explanation and users started a #DeleteFacebook campaign.

The giant social network eventually admitted it had been too loose with controls over its customers' data and ushered in a series of changes that gave Facebook's 2.2 billion members oversight over their personal information. It has continued to blame Cambridge Analytics and researcher Kogan for their actions, which they have denied.

“This doesn’t change our commitment and determination to understand exactly what happened and make sure it doesn’t happen again," Facebook said in a statement sent to USA TODAY. "We are continuing with our investigation in cooperation with the relevant authorities."

Facebook said it planned an audit of Cambridge Analytica but was awaiting one from U.K. regulators.

Cambridge Analytica CEO Alexander Nix had been suspended in March after a series of TV broadcasts showed him making controversial statements about his firm's work on elections, including how Cambridge Analytica played a major role in Trump's presidential victory.

The fortunes of Cambridge Analytica were closely tied to the Trump campaign's successful win for the White House, and some of the fallout from the Facebook data scandal has overlapped with federal investigations into that 2016 race. The firm claimed it could predict how people will vote based on the 5,000 pieces of data it collected on nearly every American adult combined with the results of thousands of personality surveys. It had touted its role as swinging the presidential election.

Two of President Trump's biggest boosters, American hedge fund billionaire Robert Mercer and former White House aide Steve Bannon, had invested in Cambridge Analytica. Bannon, who divested his stake in April, was also a vice president at the company from 2014 to 2016 and received a monthly consulting fee until 2016.

While at the firm, Bannon began preparing for the 2016 election two years in advance, according to Cambridge Analytica whistleblower Christopher Wylie, who testified before House Democrats in a closed-door session last month. Bannon directed the firm to test messages such as "build the wall" and "drain the swamp" and to test images and concepts for a U.S. audience relating to Russian President Vladimir Putin and Russian expansion in Eastern Europe, he testified.

Bannon was not concerned whether campaign ads created and promoted through Cambridge Analytica had false information because he was trying to win a "culture war," Wylie testified. "Cambridge Analytica was set up to be essentially a full-service propaganda machine," he said.

Special counsel Robert Mueller has asked the firm to turn over its internal documents as part of his investigation into Russian meddling in the U.S. presidential election.

The concerns about potential misuse of data and digital marketing to undermine privacy extend beyond Cambridge Analytica to firms across the political spectrum, says Jeff Chester, executive director for privacy watchdog group Center for Digital Democracy.

"Rather than rejoicing that a bad actor has met its just reward, we should recognize that many more Cambridge Analytica-like companies are operating in the conjoined commercial and political marketplace," Chester said in a statement. "Without a federal privacy law to protect consumer privacy online, and an empowered and emboldened FEC, Americans will continue to be victimized by the out-of-control 'Big Data' surveillance apparatus that is the core of our digital — and political — experience."

Cambridge Analytica's bankruptcy is just the latest development in the continued fallout from the scandal, which extended this week to Facebook's headquarters. Jan Koum, founder and CEO of WhatsApp, the messaging app Facebook acquired four years ago for $16 billion, said Monday he was leaving Facebook and the company's board of directors. Koum's strong stance on privacy is seen as motivation for his departure.

Also this week, Facebook CEO Mark Zuckerberg, who in April was peppered with questions about privacy during two Congressional hearings, announced new, upcoming Facebook features to address users' concerns. Among them: the ability to delete data Facebook gathers on you as you visit websites and apps.

Cambridge Analytica maintained "unwavering confidence that its employees have acted ethically and lawfully," the company said Wednesday, but "the siege of media coverage has driven away virtually all of the Company’s customers and suppliers."

That led to the decision to file for bankruptcy, the company says. "Despite the Company’s precarious financial condition, Cambridge Analytica intends to fully meet its obligations to its employees, including with respect to notice periods, severance terms, and redundancy entitlements," it said.

Cambridge Analytica, with offices in New York, Washington and London, has said it has 107 full-time employees. Most of the employees work in its central London headquarters.



The company decided to shut down because it was losing clients and had growing legal fees from the Facebook investigation, The Wall Street Journal reported Wednesday, citing a person familiar with the matter. .

More: Cambridge Analytica active in elections, big data projects for years

Cambridge Analytica commence insolvency proceedings and release results of independent investigation: https://t.co/BeDLpU1gIh — Cambridge Analytica (@CamAnalytica) May 2, 2018

More: Cambridge Analytica whistleblower: Steve Bannon used data to discourage Democratic turnout

Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.

