NEW YORK – Ever wonder why LinkedIn (NYSE:LKND) is so adroit at recommending new connections that you just emailed a few days ago? Well it turns out that the world’s most popular professional-networking site might be hacking users email accounts to obtain information on whom they are emailing. At least that is what a lawsuit filed in Federal Court on Friday alleges. The Plaintiffs in the case, Perkins et al. v. LinkedIn, aim to block the company from repeating the alleged violations and to make it to return any revenue stemming from its use of their identities to promote the site to non-members, according to a court filing.
According to the complaint, ‘LinkedIn’s own website contains hundreds of complaints regarding this practice.’ Furthermore, CEO Jeff Weiner’s comments on growth optimization efforts during the company’s second quarter earnings call are expected to receive considerable scrutiny.
Following news of the lawsuit, shares in LinkedIn fell by more than 2 percent, to close the week at $ 243.90. The company tried to downplay the case with representatives claiming it was without merit. In a statement, representatives for the company said, ‘LinkedIn is committed to putting our members first, which includes being transparent about how we protect and utilize our members’ data.’
However, the plaintiffs allege that LinkedIn accessed the email accounts that users used to register their account to download email addresses to LinkedIn’s servers. From there, the plaintiffs allege that LinkedIn is able to ‘download these addresses without requesting the password for the external e-mail accounts or obtaining users’ consent.’ The plaintiffs further allege that this approach is part of the company’s strategy to ‘pursue initiatives that promote the viral growth of our member base.’
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The lawsuit casts a shadow on the company that has become the standard-bearer for professional network, in some instances replacing resumes. If the company were found to have illegally accessed the email accounts of its users, the decision would not only affect LinkedIn’s reputation but would also change how social networks utilize user information. This could also affect Twitter, who recently announced its IPO for later this year. Given the far-reaching consequences of this case, it is likely that a number of analysts will downgrade LinkedIn in the coming weeks.