His tabloid name is the Baby-Faced Wolf of Wall Street, and now Facebook wants to paint him as the face of ad fraud. Martin Grunin, a 22-year-old New Yorker, was accused of a sophisticated online advertising scheme that could have made him millions of dollars, and the social network is suing him over $340,000 in unpaid bills.
Grunin trafficked in Facebook ad accounts that he allegedly opened using faked identities and sold them on the black market where affiliate marketers scooped them up to amass the lucrative marketing inventory. Grunin also was accused of operating as an affiliate marketer, selling ad space to third parties, and keeping the money without paying Facebook on accounts he opened using the phony credentials.
Facebook’s complaint against Grunin, filed in U.S. district court in San Francisco this week, starts like this:
“Defendant Martin Grunin is a serial offender who has repeatedly violated Facebook’s terms and applicable law. His unlawful activities include defrauding Facebook, accessing Facebook without authorization, selling access to Facebook advertising accounts without authorization, and tricking Facebook users into visiting commercial websites so that he could earn referral fees.”
Facebook would call Grunin a rare case of ad fraud within its system, and in some ways Grunin was a uniquely bad actor, if his transgressions prove true. He was known on forums, where he sold Facebook ad accounts, for his ostentatious behavior, he was flashy, and he flaunted his fraud, according to sources familiar with the underground marketing world in which Grunin made his money.
“He was so extravagant,” a source, who knew Grunin from online forums, told Adweek. “He’d been in business for a couple years, and was really flamboyant, really showing off.”
This week, The New York Post wrote about Grunin, a Brooklyn graduate of Saint Francis College, comparing him to the Wolf of Wall Street, a character popularized in last year’s Martin Scorsese film about a real-life stock manipulator.
Starting in 2011, Grunin allegedly began running an affiliate marketing scam that some would say is quite common. He would win authorization from Facebook for a campaign—and after the marketing materials were approved by the social platform, he would switch up the content to make it more clickable, but that violated the rules of the social network.
In particular, Facebook bans ads that drive traffic to adult-themed sites, though shady marketers find workarounds by masking their links and constantly changing Facebook ad accounts once they’re caught.
The affiliate marketing scheme happens often, according to sources. “A lot of these guys are 16-year-olds or 20-year-olds, young guys by themselves in their basements,” a source said speaking on the condition of anonymity.
The source said that, while Facebook is suing Grunin for more than $340,000, he likely sold millions of dollars worth of ads. In most cases, marketers who use these tactics pay Facebook what’s owed and make money by selling the ad space for more than they spent, staying under the radar by paying their bills. Grunin apparently stopped paying his Facebook bills.
He was accused of opening accounts by posing as a representative of legitimate companies. Facebook authorized at least two accounts on which Grunin sold $340,000 worth of ads but never paid the social network. Grunin was running ads that claimed Dr. Oz and Jennifer Lopez were spokespeople, Facebook said in its lawsuit.
Grunin also sold accounts with thousands of dollars of credit attached.
“These fraudsters need as many accounts as they can get to be able to spend as much money as possible as fast as possible to make a lot of money,” a source said.
The marketers buy the accounts and sell ads on behalf of third parties, which pay high rates, using aggressive, spammy, misleading, click-baiting messaging. They can claim anything from “Oprah endorses this message” to “this product will extend your life.”
It was unclear if Grunin would face criminal charges, but sources told Adweek that the appropriate authorities have been contacted.
“We take abuse very seriously. We continually pursue bad actors who seek to harm Facebook and the people who use it,” a Facebook spokesperson said.