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Government Actions

FTC vs NGL Labs, LLC

The Federal Trade Commission and the Los Angeles District Attorney’s Office are taking action against NGL Labs, LLC and two of its co-founders, Raj Vir and Joao Figueiredo, for a host of law violations related to their anonymous messaging app, including unfairly marketing the service to children and teens. The defendants will pay $5 million to settle the lawsuit, and will be banned from offering their “NGL: ask me anything” app to anyone under the age of 18.

 

In their complaint, the FTC and Los Angeles DA’s Office allege that NGL and its co-founders not only actively marketed their service to children and teens, but that they also falsely claimed that its AI content moderation program filtered out cyberbullying and other harmful messages. In addition, the complaint alleges that the defendants sent fake messages that appeared to come from real people and tricked users into signing up for their paid subscription by falsely promising that doing so would reveal the identity of the senders of messages.

 

“NGL marketed its app to kids and teens despite knowing that it was exposing them to cyberbullying and harassment,” said FTC Chair Lina M. Khan. “In light of NGL’s reckless disregard for kids’ safety, the FTC’s order would ban NGL from marketing or offering its app to those under 18. We will keep cracking down on businesses that unlawfully exploit kids for profit.”

 

California-based NGL was launched in 2021 as an anonymous messaging service that allows people to receive anonymous messages from their friends and social media followers. NGL and its operators marketed the app as a “safe space for teens” and claimed it uses “world class AI content moderation” including “deep learning and pattern matching algorithms” to combat cyberbullying and other harms.

 

In their complaint, however, the FTC and the Los Angeles DA’s office allege that NGL and its operators actively marketed their service to kids despite being aware of the harms from similar services; made false claims about their AI content moderation program; deceived users with fake messages and other tactics aimed at driving up the number of paid users; failed to clearly disclose and obtain consent for recurring charges for its NGL Pro service; and violated the Children’s Online Privacy Protection Act Rule (COPPA Rule).

 

After failing to generate much interest in its app, NGL in 2022 began automatically sending consumers fake computer-generated messages that appeared to be from real people. When a consumer posted a prompt inviting anonymous messages, they would receive computer-generated fake messages such as “are you straight?” or “I know what you did.” NGL used fake, computer-generated messages like these or others—such as messages regarding stalking—in an effort to trick consumers into believing that their friends and social media contacts were engaging with them through the NGL App.

 

When a user would receive a reply to a prompt—whether it was from a real consumer or a fake message—consumers saw advertising encouraging them to buy the NGL Pro service to find out the identity of the sender. The complaint alleges, however, that consumers who signed up for the service, which cost as much as $9.99 a week, did not receive the name of the sender. Instead, paying users only received useless “hints” such as the time the message was sent, whether the sender had an Android or iPhone device, and the sender’s general location. NGL’s bait-and-switch tactic prompted many consumers to complain, which NGL executives laughed off, dismissing such users as “suckers.”

 

In addition, the complaint alleges that NGL violated the Restore Online Shoppers’ Confidence Act by failing to adequately disclose and obtain consumers’ consent for such recurring charges. Many users who signed up for NGL Pro were unaware that it was a recurring weekly charge, according to the complaint.

 

In addition to the ban on marketing anonymous messaging apps to kids and teens under 18, the proposed order also requires NGL, Vir, and Figueiredo to pay $4.5 million, which will be used to provide redress to consumers, and a $500,000 civil penalty to the Los Angeles DA’s office. Under the proposed order, which must be approved by a federal court before it can go into effect, NGL and its operators also will be:

 

Required to implement a neutral age gate that prevents new and current users from accessing the app if they indicate that they are under 18 and to delete all personal information that is associated with the user of any messaging app unless the user indicates they are over 13 or NGL’s operators obtain parental consent to retain such data;

 

Prohibited from making misrepresentations about the sender of messages on any app and making similar false claims as outlined in the complaint;

 

Prohibited from making misrepresentations about the capabilities of any artificial intelligence technology, and its ability to filter out cyberbullying;

 

Prohibited from making misrepresentations related to negative options and required to disclose all details related to recurring charges; and

 

Required to obtain express informed consent from consumers prior to billing them for a negative option subscription, provide a simple mechanism for cancelling any negative option subscriptions, and to send reminders to consumers about negative option charges.