WTF?! The endlessly beleaguered facial recognition company Clearview AI is making news again. However, it’s not over the startup’s image scraping practices, which are questionable at best. This time, the company is attempting to keep itself out of bankruptcy by offering millions of plaintiffs in a privacy class action a stake in the company worth about 30 cents per claimant after lawyer fees.
Clearview AI wants to settle a class action lawsuit accusing it of violating privacy laws. The case is notable because it’s not a cash payout. Instead, Clearview agreed to put up a 23-percent equity stake in the company to compensate any US citizens who have pictures in its 40-billion-image database. The New York Times obtained court documents indicating the stake could be worth around $50 million.
So, why not just pay in cash? The company, whose backers include billionaire Peter Thiel, said the equity stake settlement was the only way to keep Clearview out of bankruptcy. In other words, it doesn’t have $50 million in liquid assets. This revelation is unsurprising since it has been fighting lawsuits for the last four years.
Entrepreneur, computer engineer, and CEO Hoan Tan-That quietly co-founded Clearview AI in 2017. For three years, it operated under the public’s radar. Then, in 2020, The New York Times ran an exposé outing the startup’s sketchy data-gathering practices. The facial recognition startup is notorious for scaping facial images from social media platforms without permission.
It also exposed its partnerships with law enforcement agencies, including the FBI and Department of Homeland Security, noting that Clearview sold law enforcement warrantless access to its extensive database of faces and facial recognition software. Tan-That defended his company’s actions, claiming that the First Amendment protects its data harvesting practices. The irony of using the First Amendment to violate the Fourth was not lost on the public.
The startup was bombarded with cease-and-desist orders from most of social media. It also faced numerous lawsuits in the US and abroad claiming it violated privacy laws. Many of these complaints are still pending. So, even if a judge agrees to this settlement proposal, which is not guaranteed, Clearview’s legal concerns are far from over.
As for the substance of the settlement, $50 million equity in the company might seem like a lot on its surface, but by the time the lawyers take their 30-40 percent, plaintiffs will have little more than $30 million to divide among themselves. It doesn’t take a mathematician to figure out that equates to around 30 cents per plaintiff, considering a conservative estimate of 100 million Americans in the database.
Evan Greer, director of the privacy advocacy group Fight for the Future, criticized the settlement, saying, “If mass surveillance is harmful, the remedy should be stopping them from doing that, not paying pennies to the people who are harmed.”
