Facebook to establish digital trust fund in court settlement

The settlement is a result of a federal class-action lawsuit originally bought against Facebook over alleged privacy violations. Filed in August 2008, it focused on Facebook's Beacon system, which when originally introduced, posted information about users online without their permission.

Facebook, which removed Beacon last November without admitting any wrongdoing, agreed to a $9.5 million settlement that was approved this week by a US district court judge. $6 million of that money will be used to set up a "digital trust fund" that will issue grants to organisations studying online privacy. Facebook will occupy one of the three seats on the non-profit foundation's board. The others will be taken by writer Larry Magid, and Chris Jay Hoofnagle, who heads the Berkeley Center for Law and Technology.

"We're pleased that [U.S. District Court Judge Richard] Seeborg has approved the settlement after carefully considering all opinions," said a spokesperson for Facebook. "The independent foundation will fund worthy projects helping protect and improve internet users' privacy, safety and security. We look forward to providing additional details on the foundation in the weeks and months ahead."

The fund was created largely because the payout under the settlement would be divided among too many people (3.5 million plaintiffs) to be worthwhile.

However, privacy groups protested the mechanics of the settlement, arguing that Facebook shouldn't be on the board of the trust fund, and also complaining that consumers should have received direct relief as a result of the settlement.

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