LifeLock, Inc. (LOCK) Collapses on New FTC Allegations
Shares of Tempe, Arizona based LifeLock, Inc. (LOCK) went into a freefall on Tuesday, against the backdrop of a generally lower day in stocks overall. LifeLock fell $7.91 per share, down 49.25% to close at $8.15 per share on volume of 48,375,983 shares. The sell off was attributed to allegations from the Federal Trade Commission that the company violated a settlement reached in 2010 by making deceptive claims in regard to its identity theft protection services and for failing to secure customer information.
On Tuesday it was revealed that Federal Trade Commission (FTC) is alleging that LifeLock has violated a settlement reached in 2010. The FTC claims that LifeLock is failing to protect it's customer's data, and that it has been making deceptive claims about its identity theft protection services. The FTC has requested "full redress to all LifeLock customers who have been affected by the alleged violations.
In the most recent court filing in federal court in Arizona, the FTC has alleged that LifeLock failed to set up a comprehensive information security program that would be aimed at protecting the personal data of it's customers and clients. The information security program was required to, among other things, protect Social Security numbers, credit card numbers and bank account information.
LifeLock counter-claimed that the violations alleged by the FTC represent past business practices, and that it has fully complied with all terms of the 2010 settlement and that they are not aware that the allegations pertain to the loss of any customer data. The FTC has also alleged that LifeLock has falsely advertised that its data security services were comparable to data security offered by financial institutions, and that the company did not meet the record keeping requirements of the 2010 settlement.
Under the 2010 settlement with the FTC, LifeLock had agreed to make the required changes, in addition to the payment of $12 million paid to the FTC and 35 states.
As expected, LifeLock is challenging the most recent claims made by the FTC's and is planning to fight the charges in court.
"After more than 18 months of cooperation and dialogue with the FTC, it became clear to us that we could not come to a satisfactory resolution of their issues outside a court of law. We disagree with the substance of the FTC's contentions and are prepared to take our case to court the Company responded in a news release. "Importantly the FTC is not seeking any relief that would change LifeLock services and products going forward. The claims raised by the FTC are all related to the past, not to current business practices. LifeLock takes the accuracy of our advertising materials very seriously. The alerting claims raised by the FTC did not result in any known identity theft for LifeLock members.
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