A federal Judge in California is allowing a lawsuit against Visa to proceed, and a prominent CEO and hedge fund manager has now weighed in on the matter.
The suit, titled Serena Fleites v. MindGeek et al., (which can be read here) alleges that Visa helped the privately owned Canadian company MindGeek monetize child pornography through its website PornHub.
Visa (V) is singled out in the suit for offering payment processing services to Pornhub despite knowing that the pornography website had failed to moderate videos of minors. Visa attempted to have its portion of the lawsuit dismissed, but District Court Judge Cormac Carney rejected that motion, saying Visa plausibly “intended to help MindGeek monetize child porn”
MindGeek Accused Of Not Acting Fast Enough To Remove Videos
The lawsuit alleges that MindGeek and Visa violated a series of laws that the Trafficking Victims Protection Reauthorization Act (TVPRA) and the California Unfair Competition Law (UCL).
The suit stems from a case that was covered in detail by the New York Times in 2020. The plaintiff alleges she was pressured by her then boyfriend at the age of 13 to make a sexually explicit video, which was later uploaded to PornHub.
As noted by The Verge, Pornhub was alerted that the video, but the company “allegedly delayed taking it down for weeks, allowing it to be repeatedly downloaded and reuploaded and earning ad revenue alongside it.”
Visa temporarily cut off Pornhub following the New York Times article, which suggested the platform allowed illegal videos containing child sexual abuse to remain on the site.
“Visa lent to MindGeek a much-needed tool — its payment network — with the alleged knowledge that there was a wealth of monetized child porn on MindGeek’s websites,” Judge Carney wrote. His ruling notes that after the New York Times report, MindGeek removed 10 million videos from the site, a move that indicates to Judge Carney that Visa could have more forcefully pressured the company to police its content for illegal material.
“Visa is not being asked to police ‘the billions of individual transactions it processes each year,’” states the judge’s order. “It is simply being asked to refrain from offering the tool with which a known alleged criminal entity performs its crimes.”
The ruling differentiates Visa from other companies that are indirectly affiliated with PornHub, such as Google (GOOGL).
“Visa allegedly knowingly provided the very tool through which MindGeek committed its alleged crime of financially benefiting from child porn,” Carney writes. “Even if Google knows that its search engine is being used to drive traffic to a website allegedly teeming with child porn, and thereby indirectly helps that website financially benefit from its illicit content, it would not have provided a tool through which the crime is completed, unlike Visa.”
In a statement to Variety, Visa called the ruling “disappointing,” saying it “will not tolerate the use of our network for illegal activity." The company added that “we continue to believe that Visa is an improper defendant in this case.”
A Prominent CEO Weighs In
Bill Ackman, the CEO of the hedge fund Pershing Square Capital Management, took to Twitter weigh in on the lawsuit.
Ackman is reportedly worth $2.9 billion by Forbes, and has a reputation as an activist investor. He has signed The Giving Pledge, campaign to give away at least 50% of his wealth to charitable causes, and through various foundations he has supported both Planned Parenthood and Innocence Project.
Ackman sounds disgusted, and is clearly unwilling to mince words, saying that "Both are culpable. Visa’s conduct here is inexcusable."
He goes on to say that "Both are culpable. Visa’s conduct here is inexcusable," and in a follow-up Tweet adds that the lawsuit will "cause the company incalculable financial and reputational damage and create serious Caremark personal liability and potential criminal liability for the board."
Ackman then notes that after the New York Times report, he reached out to the CEO of MasterCard, "who took my concern seriously. Within 5 days, MC had shut down the site. 5 days later Visa followed suit."
He thought this would be enough to end PornHub, but instead he wrote that "Quietly, however, a few weeks later, both Visa and MC reauthorized MindGeek, but no longer allowed BTC payments on the free “tube” sites where anyone can upload content."
Ackman than said that "In its defense, Visa claims it has no liability, protested that the payments industry would collapse if it did, and attempted to dismiss the suit taking comfort in its statement “Maintaining a neutral stance under the law is vital for the free flow of commerce.”
In conclusion, Ackman notes that "Visa is a Delaware Corp. and Caremark liability applies. In short, directors can be held personally liable if the company’s product or service causes harm and the board has provided inadequate oversight to monitor the potential for harm. The harm here is enormous."
He then singled out Visa CEO Alfred Kelly, saying "I would recommend that Visa’s board, and separately Mr. Kelly, should hire independent white collar and criminal counsel. They might also review Visa’s ESG policies."
