Facebook removes “exaggerated promises” from company tied to Trump campaign manager

Facebook has taken down dozens of ads from a company in which Trump campaign manager Brad Parscale is the largest shareholder because it violated the platform’s policy against “get-rich-quick” schemes and made “exaggerated promises.”

The company, CloudCommerce, is a digital marketing corporation that in 2017 bought two companies owned by Parscale. He owns 42% of CloudCommerce, and was on the board of directors as recently as October 25, 2019, according to a company document filed to the U.S. Securities and Exchange Commission.

The CloudCommerce ads removed by Facebook were promoting a stock offering that promised a high dividend payment of 10%.

A February 26 screenshot from Facebook’s Ad Library shows a CloudCommerce ad that would eventually be disabled by the social media platform, as well as grey placeholders for ads that had already been removed. CBS News

“We’ve rejected (CloudCommerce’s) ads because our policies prohibit the kinds of tactics that mislead people through exaggerated promises of guaranteed financial success,” Facebook said in a statement sent to CBS News.

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Facebook directed CBS News to its policy against “multilevel marketing,” which reads: “Ads promoting income opportunities must fully describe the associated product or business model, and must not promote business models offering quick compensation for little investment, including multilevel marketing opportunities.” The one example given: “Get-rich-quick” schemes. 

facebook-multilevel-marketing.png Facebook’s “Multilevel Marketing” policy. CBS News

Parscale distanced himself from CloudCommerce in a statement to CBS News, saying he no longer serves on the board of directors.
 
“I sold two of my previous companies to CloudCommerce and part of the deal was non-voting preferred stock, which I can’t sell. I resigned from the board last year and have no say in the activities of the company. I have nothing to do with their decisions,” Parscale said.

CloudCommerce executives did not reply to questions sent by CBS News.

The rejected ads on Facebook do not use the Parscale name and it does not appear prominently on the CloudCommerce website.

Parscale’s name does appear repeatedly in documents filed with the SEC.

In one SEC filing that provides information about the “Series F Preferred Stock,” the stock offering marketed in the rejected Facebook ads, the company says “Parscale has served on the board of directors of the Company since the acquisition of Parscale Creative on August 1, 2017.”

It also notes the Parscale name might have an effect on CloudCommerce’s client base.

“Even if the political or media climate diminished the Parscale name, our client base is dedicated to the name, and not swayed by politics or media coverage. In addition, there is a large group of clients who find more appeal to the Parscale name, because of political or media pressure,” the company wrote in the filing.

CloudCommerce says on its website it hopes to raise $20 million in the stock offering.

A company website marketing the stock offering touts the 10% dividend promise. A large flip counter at the top of the page rolls from zero to 10. Beneath it, a slider calculates the annual return of any investment – the result is always 10%, an exceptionally high rate of return at a time when the average dividend yield for established companies is closer to 2%.

CloudCommerce is a so-called penny stock, with shares trading recently for approximately one-quarter of a cent. The “Series F Preferred Stock” sells for $25 per share, with a minimum investment of $500.

Investors considering buying stocks should read offer literature, according to Georgetown Law Professor Rusell Stevenson, who noted the CloudCommerce acknowledges the payments “will be made monthly provided legally available funds are available.”

“You should always read the offering circular, which is cleared by the SEC, before investing,” said Stevenson, who is a former Deputy General Counselor for the SEC.

Joshua Mitts, a Columbia University associate professor specializing in securities law, said the site does not note the risks involved in investing with the company. He said the company’s “aggressive marketing strategy,” is “walking right up to the line” of what could draw the scrutiny of regulators.

Among the risks noted by CloudCommerce in its offering circular: “We have a history of losses and can provide no assurance of our future operating results. We have experienced net losses and negative cash flows from operating activities, and we expect such losses and negative cash flows to continue in the foreseeable future,” the company writes in a document with the SEC.  It later cites the opinion of independent auditors who in 2018 and 2017 had “substantial doubt about our ability to continue as a going concern.”

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