Securities Regulation Daily Wrap Up, FEDERAL PREEMPTION—N.D. Cal.: Meta pump-and-dump claims barred by SLUSA, (Jul 20, 2026)

By Rodney F. Tonkovic, J.D.

The plaintiffs framed Meta Platforms as part of the causal chain leading to their securities purchases, satisfying SLUSA’s "in connection with" requirement.

A district court concluded that allegations that Meta Platforms enabled a "pump-and-dump" scheme were barred under the Securities Litigation Uniform Standards Act. The complaint alleged that Meta's advertising tools were used by criminals to target the plaintiffs, so the company was liable for their losses. The complaint alleged a variety of state law causes of action, but the court concluded that the alleged misrepresentations were made "in connection with" securities transactions and were thus barred by the SLUSA (Daigneau v. Meta Platforms, Inc., No. 25-cv-10180 (N.D. Cal. July 17, 2026) and (Irving v. Meta Platforms, Inc., No. 26-cv-01127 (N.D. Cal. July 17, 2026)).

Pump and dump. There are two related cases in which the plaintiffs claim that they were induced by fraudulent advertisements to invest in pump-and-dump schemes. In Daigneau, the plaintiffs invested in Ostin Technology Group, and in Irving, they invested in Jayud Global Logistics.

The plaintiffs in both cases claim that criminal networks operating out of China used ads created by Meta and distributed through Facebook, Instagram, and WhatsApp to extract millions of dollars from the victims. The criminals used Meta's tools to generate ads featuring celebrities, well-known investors, and reputable advisory firms promising strategies and investments that would lead to large short-term returns.

Using Meta's tools, the ads were targeted to susceptible individuals, who were pressured to buy large amounts of stock. The scammers then dumped their shares, collapsing the stock and causing over 300 people to lose nearly $30 million (in both cases combined).

The complaint alleged that Meta contributed to the scams because its advertising tools were available and optimized for the scam advertisements. In addition, Meta was aware of investment scams originating in China and perpetrated through its platforms. Meta failed to prevent or remove the fraudulent ads despite promising to do so in its terms of service.

Claims barred. The plaintiffs brought claims for: (i) aiding and abetting fraud; (ii) breach of contract; (iii) breach of the implied covenant of good faith and fair dealing; (iv) promissory estoppel; (v) negligence; and (vi) unjust enrichment. Meta countered that the claims were barred by the Communications Decency Act and the SLUSA.

The court concluded that the claims were barred by the SLUSA. The plaintiffs argued that the SLUSA's "in connection with" requirement was not met, asserting that the claims arose not from the purchase of securities but rather from Meta's facilitation of the fraudulent conduct by helping to develop targeted advertising.

The court explained that the plaintiffs expressly alleged that Meta’s role was a material part of the causal chain that led them to purchase the covered securities, and that Meta, therefore, was liable for aiding, abetting, and failing to prevent the fraud. This framing of the claims meant that the "in connection with" requirement was met. The court noted further that this conclusion matches a recent decision in the Northern District in which the same attorneys made identical allegations against Meta; as in this case, the "in connection with" requirement was met.

The court granted Meta's motion to dismiss for lack of jurisdiction and dismissed both cases without prejudice.

The case is No. 25-cv-10180 and 3:26-cv-01127.

Judge: Orrick, W.

Attorneys: Andrew Walker Robertson (Morris Kandinov LLP) for Maurie Daigneau. Allison Schultz (Wilmer Cutler Pickering Hale and Dorr LLP) for Meta Platforms, Inc.

Companies: Meta Platforms, Inc.

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