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Judge Denies Zynga's Request To Dismiss Scam Suit

Judge Denies Zynga's Request To Dismiss Scam Suit

November 15, 2010 | By Eric Caoili

November 15, 2010 | By Eric Caoili

A federal judge denied Zynga's request to dismiss a class action lawsuit accusing the major social game developer of profiting from scam-like offers that promise users free virtual currency.

The case centers on Zynga's use of lead-generation ads -- typically provided by an external advertising network -- that offer players free virtual currency for social games in exchange for completing surveys, signing up for trial offers, watching videos, or interacting with brands in other ways.

These offers came under fire last year as users and tech sites complained that some third-party offers were causing unauthorized charges to appear on their credit cards and mobile phone bills. Many developers and ad networks responded by pledging to rid their games and services of these scam-like ads.

Rebecca Swift, the lead plaintiff in the class action suit filed against Zynga and advertising firm Adknowledge, said she was charged over $200 for products and services without her consent after she signed up to receive free YoCash, or virtual currency used in the developer's social game YoVille.

Zynga asked U.S. District Judge Sandra Armstrong to dismiss the case and claimed it's not responsible for the actions of third-party advertisers. Swift, however, said Zynga is not "a neutral website that merely allows third parties to post advertisements" and is a "direct participant in the fraudulent transactions".

The plaintiff argued that Zynga encourages the acquisition of virtual currency by designing its games to be more enjoyable when users purchase in-game cash. Zynga is also said to be responsible for "the design, layout, and format of the special offers," as the ads appear directly within the company’s games.

Swift argues that Zynga designed its games to intentionally create the demand for virtual currency, then used that demand to lure customers into the allegedly fraudulent transaction, which the plaintiff claimed is "material contribution to the alleged unlawful activity", according to documents posted by Courthouse News Service.

Judge Armstrong denied Zynga's request to dismiss the lawsuit as she believed the plaintiff "sufficiently alleged the particular circumstances of defendants' fraudulent scheme". It also refused Adknowledge's dismissal request as the plaintiff "sufficiently identified ... Adknowledge’s role in the alleged fraudulent scheme.

Moving forward, both sides in the case are scheduled to meet for a "telephonic case management conference" next February, according to court documents.

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