Thread by @BillAckman

Yesterday, a Federal judge rendered a decision pershingsquarefoundation.org/wp-content/upl… that no one has likely read. You should. The lawsuit is against MindGeek, the largest internet porn company in the world, and @Visa. Both are culpable. Visa’s conduct here is inexcusable,

likely to cause the company incalculable financial and reputational damage and create serious Caremark personal liability and potential criminal liability for the board. The decision summarizes the life destruction of a 13-year-old girl due to a sex video

she was pressured to make by her then boyfriend, which in turn was uploaded to one of MindGeek’s sites. I learned about the story originally from nytimes.com/2020/12/04/opi… which I shared on Twitter. In real time I attempted to contact @Visa’s and @Mastercard CEOs.

I was successful in reaching the CEO of MC who took my concern seriously. Within 5 days, MC had shut down the site. 5 days later Visa followed suit. Within a day or so, MindGeek removed >10m illegal videos, 80% of its content.

Without Visa/MC, MindGeek was toast as @PayPal had shut them down a year earlier and Amex does not do porn. 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.

Instead, they continued to allow their cards to be used for B2B business, that is, the purchase of ads on these same tube sites and for subscriptions to “premium” content, together about 90% of the business. Hours later, MindGeek began restoring its illegal content library.

The only age verification MindGeek now uses before accepting a video is checking the ID and age of the uploader, often the perpetrator of the crime.

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.”

The judge in a carefully reasoned decision disagrees: “Visa is being kept in this case because it is alleged to have continued to recognize as a merchant an immense, well known, and highly visible business that it knew used its websites to host and monetize child porn.

Moreover, Visa allegedly had considerable sway over that business’s decision-making, a conclusion amply supported by allegation that MindGeek removed 80% of its content when Visa suspended its business with MindGeek.

Visa is not being asked to police ‘the billions of individual transactions it processes each year.[Visa’s argument] It is simply being asked to refrain from offering the tool with which a known alleged criminal entity performs its crimes. That is not a tall order

and does not spell out an existential threat to the financial industry.”

“At this early stage of the proceedings, before Plaintiff has had any discovery from which to derive Visa’s state of mind, the Court can comfortably infer that Visa intended to help MindGeek monetize child porn from the very fact that Visa continued to provide MindGeek the means

to do so and knew MindGeek was indeed doing so. Put yet another way, Visa is not alleged to have simply created an incentive to commit a crime, it is alleged to have knowingly provided the tool used to complete the crime.”

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.

Think 10m++ videos of child porn and the destruction to the untold number of lives this has caused.

The TVPRA Federal criminal child sex trafficking statute applies to: ‘Whoever knowingly benefits, financially or by receiving anything of value, from participation in a venture which has engaged in [child sex trafficking]’ or anyone who conspires with any such person.

Alfred Kelly, Visa’s CEO, waxes eloquent in his annual letter about Visa’s ‘noble’ purpose, commitment to an ‘inclusive economy’ and ‘economic opportunity for all.’ He then trumpets the hiring of a Chief Diversity Officer in May 2021 reporting directly to him.

Mr. Kelly should know that the majority of child trafficking victims are from lower-income families including Black and Brown families. 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.

Et tu @Mastercard ?