• by Wendy Davis , Staff Writer @wendyndavis, January 31, 2019

In what's being hailed as a first, a company that sold fake followers and endorsements to celebrities and would-be influencers has settled allegations that it violated New York state laws regarding fraud and impersonation.

The now defunct company, Devumi, resolved the charges, brought by New York State Attorney General Letitia James, without admitting wrongdoing. Company owner, German Calas , Jr., agreed to pay $50,000 to New York.   

Between 2015 and 2017, Devumi allegedly made $15 million with a scheme to sell fake social media endorsements from bots or sock-puppet accounts on Twitter, YouTube, LinkedIn, SoundCloud, Pinterest and Vimeo, according to the settlement agreement.

Devumi's clients included established actors, businesspeople, politicians and academics, as well as less successful people who “purchased social media engagement to inflate their apparent popularity in hopes of breaking into desired fields,” the complaint states.

Would-be influencers could purchase a package of up to 500,000 Twitter followers for $3,997, while “likes” and “shares” cost up to $228 a year, according to the settlement agreement. The company allegedly sold clients YouTube subscribers in packages of 100 for $29, views in packages of up to 5 million for $21,999, “likes” starting at 250 for $30 and “shares” starting at 200 for $19.

Former New York Attorney General Eric Schneiderman began investigating the company last year, shortly after The New York Timesreported on Devumi's practices.

State and federal officials have previously targeted people responsible for phony content -- like ads masquerading as reviews, or astroturfing sites. But this case appears to mark the first time a governmental official has suggested that inflating popularity on social media is itself deceptive.

“What's significant about this is that it's focused on the “likes” and the “follows” themselves,” Jeff Greenbaum, an advertising lawyer with Frankfurt Kurnit Klein & Selz, says. “This is not a case that's merely about an endorsement that somebody made without disclosing their relationship,” he adds.

It's possible that fraudsters may inflate social media engagement in other ways -- beyond fake followers or likes -- Greenbaum adds. If so, they're at risk of prosecution by state and federal officials. “Transparency online continues to be a huge issue for federal and state regulators,” he says.