Coffee Break: Stressed Oligarchs at Meta, OpenAI, and the Ellison Empire

Meta Platforms faces a federal trial in Oakland before Judge Yvonne Gonzalez Rogers over claims it addicted young users to Instagram and Facebook, with 29 state attorneys general seeking up to $1.4 trillion in penalties, though states have cited $200 billion as a more likely amount. The trial, which began August 18, 2026, follows a consolidated action filed in 2023 and charges Meta with violating federal child privacy laws and state consumer protection laws, with states' lawyer Megan O'Neill stating, "Meta's business model worked especially well for kids.

Four particularly stressed oligarchs are getting a lot of negative attention this week as Mark Zuckerberg’s Meta faces a $1.4 trillion lawsuit, Sam Altman’s OpenAI is bleeding talent and their IPO seems an ever more remote possibility, and Larry and David Ellison are in a full-on media war with 12 attorneys general over their attempted merger of Paramount and Warner Bros Discovery. Let’s start with the least likable of the bunch…just kidding, who could dislike any of these charmers? Meta’s Legal Jeopardy Multiplies But seriously, Mark Zuckerberg has to be one of the least sympathetic characters in American business history so let’s start with a quick celebration of his current legal troubles. Let’s use the Gray Lady’s coverage for the basics https://www.nytimes.com/2026/08/18/technology/meta-social-media-addiction-trial.html : Meta on Tuesday again defended itself over claims it addicted young people to social media, this time in a federal trial brought by states seeking roughly $200 billion in penalties and changes to the company’s platforms. In opening statements, California, Colorado, Kentucky and New Jersey accused the social media giant, which owns Instagram and Facebook, of harming children with technology designed to be addictive like cigarettes. … The suit charges the company with violating federal child privacy laws and state consumer protection laws.“Hook the users. Hold them for as long as they can. Harvest their data. Hide the truth from the public when making public statements,” Megan O’Neill, a lawyer for the states, said during her opening statement. “Meta’s business model worked especially well for kids.” Woe is Meta, Sayeth the Biz Press It’s interesting to contrast the NYT coverage with what Meta was saying about the case last month via 24/7 Wall Street https://www.msn.com/en-us/money/technologyinvesting/meta-s-lawyers-say-a-loss-could-cost-1-4-trillion-trial-that-could-determine-the-future-of-zuckerberg-s-ai-ambitions-is-underway/ar-AA2aj44W : Opening arguments in a landmark youth-safety trial against Meta Platforms begin Tuesday, August 18, 2026, in federal court in Oakland before Judge Yvonne Gonzalez Rogers, capping a consolidated action brought by 29 state attorneys general originally filed in 2023. Meta said the states are seeking as much as $1.4 trillion in penalties, a demand the company called “vastly disproportionate.” Lawyers for the states have told the judge that $200 billion is a “more likely” amount. Gizmodo had more details https://gizmodo.com/metas-teen-safety-case-just-became-a-1-4-trillion-existential-threat-2000782306 many derived from a Reuters story I can’t access : The states’ filings are sealed, but per Reuters , the penalties were calculated by multiplying the number of violations, aka the rough amount of young users impacted by the addictive design choices, by the fine amounts designated by state law.Meta argues that the number is so high that it has no parallel “in the history of consumer protection enforcement.” “Indeed, the Federal Trade Commission recently described a ‘$1 billion penalty’ as the ‘largest ever in a case involving an FTC rule violation,’” the filing states. “The AGs’ demand exceeds even those record figures by several orders of magnitude, and is in gross disproportion to the specified violations alleged here.” The case is now going to court in August, and if the judge rules against Meta, it could prove to be a substantial financial problem for the company. For months now, Meta executives have admitted to investors that they were anticipating some material loss this year due to “scrutiny on youth-related issues.” But the $1.4 trillion number was previously unknown, and it is far from the only youth-related headache the tech giant is bracing for.Meta has been plagued with mounting litigation over alleged deceptive social media practices targeting young users. In a watershed verdict delivered earlier this year, a judge found Meta and Google liable and ordered them to pay $6 million in damages to a now 20-year-old who said that deliberate addictive design features on social media platforms like Instagram got her hooked from a young age and exacerbated mental health problems like depression and anxiety. Prior to that verdict, platform operators were protected from liability for third-party content under Section 230 of the Communications Decency Act.The March verdict marked just the beginning of Meta’s legal troubles. The company still has more than 3,000 similar cases pending in California state court. Another 14 states have also brought claims similar to the one led by the four states, with the case set to go to trial early next year. The Wall Street Journal joins in the handwringing on Meta’s behalf with their piece headlined “Meta Is Fighting a Mountain of Social-Media Lawsuits—at Just the Wrong Time” https://www.wsj.com/tech/meta-is-fighting-a-mountain-of-social-media-lawsuitsat-just-the-wrong-time-0b7d12a3 and subtitled, “In the midst of an expensive AI transformation, the company is grappling with litigation that could cost it billions and force painful changes.” Meta Platforms is facing one of the most serious legal threats of its 22-year history—and it couldn’t come at a worse time for the company as it navigates a tricky and costly transition to the artificial-intelligence era. In March, the company suffered defeats in landmark court cases in California and New Mexico that accused it of giving priority to growth over the safety of its underage users. Thousands more lawsuits by individuals, school districts and more than 40 state attorneys general are pending in state and federal courts. Together, they could put the company on the hook for many billions of dollars in damages and weaken the federal protections that have historically shielded it from liability for harmful content on its platform. Meta is currently in the midst of a trial over claims by the attorney general of Tennessee, one of dozens of states that have said the company misled its users about the safety of its platform. In August, Meta will go to trial in federal court in Oakland over claims from four attorneys general. In that litigation, the states have asked for damages of up to $1.4 trillion—a sum nearly equivalent to Meta’s $1.5 trillion market capitalization. Another trial in that consolidated set of cases is slated for February.Recent cases have brought mixed results. In May, Meta settled with a Kentucky school district ahead of a trial planned in Los Angeles. It notched a win this month after the teenage plaintiff in another case dropped his suit without receiving any payment from Meta, after settling with co-defendants YouTube, Snap and TikTok. Meta said it would continue to fight “baseless” lawsuits, noting the plaintiff had created his account only six months before filing the suit. Clearly the company believes that maximizing their legal jeopardy is a strong PR play and the biz press is happy to take their side. In a separate piece, Gizmodo even opines that “The Trillion-Dollar Trial Against Meta Is Too Big to Succeed.” https://gizmodo.com/the-trillion-dollar-trial-against-meta-is-too-big-to-succeed-2000799540 Ok, then. Inc. claims that the loss of Meta’s constitutional First Amendment rights https://www.inc.com/victoria-salves/meta-biggest-risk-losing-todays-case-is-not-one-trillion-dollars-what-a-judge-could-do/91391728 , rather than financial penalty is the real risk Meta faces: If Meta loses, it may face a slew of possible court-ordered outcomes. That could result in $1.4 trillion in damages and penalties, as well as changes to the platforms themselves. The former could potentially lead to a future where Meta may “run out of money and cease to exist,” Eric Goldman, associate dean for research and professor of law at Santa Clara University School of Law, told Inc. “The court could restrict the amount of time users can spend on the site, force the services to deliver content in non-preferred ways such as reverse chronological order , eliminate notifications or social engagements such as the like button ,” Goldman said. “The possibilities are endless,” he added, “any one of these changes could dramatically reshape users’ current experiences.” … If the court prescribes that format-specific changes be made, Goldman said, it could lead to questions regarding First Amendment rights. Such claims could ultimately be addressed by the Supreme Court.“If the First Amendment doesn’t limit courts here, then eventually we should expect that courts and legislatures will force social media services to adopt all of the proposed changes and many more,” Goldman said. “In other words, if there are not adequate Constitutional protections for social media, it will be a free-for-all of regulatory interventions.” Even if the court orders major changes to the Meta’s platforms, potential appeals could delay implementation for years, Goldman said. In the meantime, legislators are pushing social media companies to make changes to its features. “These laws are already on the books or coming into effect soon. Social media services are challenging those laws in court as well, but those challenges may resolve quicker than the social media addiction appeals,” he said. One of those examples is the bipartisan Kids Internet and Digital Safety KIDS Act, which passed the House earlier this June. Now, it awaits Senate action. “Based on the legislation, we could see major feature changes in the next few years unless the laws are struck down as unconstitutional.” Ultimately, Goldman said, “every aspect of social media is in jeopardy.” The Case Meta Made Against Itself Boo hoo. Leave it to an ~~ambulance chaser~~ class action attorney actively seeking clients via this YouTube advertorial to do the best job I’ve seen of summing up the case against Meta: Key quotes: I’ll start with what might be the most remarkable document in the entire collection. It’s an internal metaanalysis titled, and I want to be clear, I’m not paraphrasing, embellishing, or doing a bit: “Long-Term Retention: The young ones are the best ones and other learnings.” Now, the purpose of the analysis was to look at Facebook users and figure out whether the age when someone first joined had any relationship to how long they stuck around. Spoiler. Oh, it did. The people who joined Facebook as tween had the highest long-term retention of any age group, roughly three times that of a comparison group of adults. And then you get to the recommendations. The document says Facebook should consider investing more heavily in bringing in tween. And it recommends that the company’s youth team prioritize tween over all other age groups. Think about why that matters. Plaintiffs aren’t simply arguing that Meta knew young people were using Facebook. Everybody knew that. They have an internal document potentially explaining why those young users were worth so much. Get someone onto Facebook when they’re extremely young, Meta’s research suggested and they may stay for much longer. And by may, I mean will. The document summarizes its own lesson. You want to bring people to your service young and early. Now, the caveat. This wasn’t a perfect census of Facebook users. The analysis relied on an age affinity model and the document itself acknowledged that methodology could contain biases. So we shouldn’t treat these numbers as gospel. But the significance for plaintiffs isn’t whether the retention difference was like three times or two and a half times. It’s that people inside Meta were studying the relationship between how young you were when Facebook got you and how likely you were to stick around and then debating whether to invest more heavily in attracting twins. And apparently at least one person inside Meta saw the parallel. In another internal communication cited by the plaintiffs as exhibit 299, an employee reacted to the company’s interest in users under 13 by comparing it to the tobacco industry and using the phrase “hook ’em young.” I want to be careful with that one because it’s almost like too rich. It’s the kind of quote you get sanctioned for if you made up. “Hook ’em young” was not Meta’s corporate slogan. It was not company policy. It was an employee apparently criticizing what the company was considering. But that’s precisely why plaintiffs and their lawyers love it. The tobacco analogy wasn’t cooked up years later by some lawyer with a highlighter. Somebody inside the building was making that comparison while it was happening. And it creates an obvious problem. If Facebook believed extremely young users could become its longest lasting users, what happens when those users are so young they’re not supposed to be on Facebook at all. Which brings us to the obvious problem with courting really young users? Facebook and Instagram aren’t supposed to be for kids under 13. Meta’s terms require users in the US to be at least 13. So yea, yuck, Zuckerberg. Now let’s get to OpenAI and their troubles. Could This Finally Be the End for Scam Altman? Let’s start with Gary Marcus, the seer of seers when it comes to criticizing OpenAI’s Large Language Model approach to Artificial Intelligence and his new piece titled: OpenAI’s unraveling has begun https://garymarcus.substack.com/p/breaking-openais-unraveling-has-begun : The opening stages of OpenAI’s unraveling, which I first warned about in January 2024 if not before , have begun. … The Wall Street Journal’s Berber Jin and Corrie Dribusch just dropped big news :openai has been tossing out a lot of vague ARR numbers, so we decided to take a deeper look. the company grew revenue by just 18% to $6.7 billion from q1 to q2, while its losses sank further into the red not a great sign ahead of an IPO w/ @cdriebusch via @WSJ pic.twitter.com/fZlM2pomTE — Berber Jin @berber jin1 August 18, 2026 and then an hour and half later, Jin dropped still further details, also bad for OpenAI: story is now updated with additional details. openai’s losses grew by $3 billion from q1 to q2, to $12.3 billion not a great look given that it added only $1 billion in revenue in the meantime, to $6.7 billion — Berber Jin @berber jin1 August 18, 2026 You don’t want your quarterly losses to quadruple right before your IPO. It’s safe to say all this is good news for Anthropic: OpenAI’s revenue grew much slower than Anthropic’s last quarter, disappointing investors who hoped the ChatGPT maker would start to catch up to its rival https://t.co/vKR5qpngoz — The Wall Street Journal @WSJ August 18, 2026 And terrible news for OpenAI. And we’ll let the John Lennon to Gary Marcus’ Paul McCartney ie they’re the Beatles of LLM doubters , Ed Zitron, apply the coup de grace with some talk about consequences in his cheerily titled piece “What Happens If OpenAI Dies?” https://www.wheresyoured.at/what-happens-if-openai-dies/?ref=ed-zitrons-wheres-your-ed-at-newsletter : I’m not trying to be a buzzkill here, but I have meaningful concerns about OpenAI’s ability to survive, and they’ve only grown more pressing in the last few years. In the same week that it , OpenAI saw both completed a $7 billion internal share buyback and COO and former CFO Brad Lightcap leave the company, the latter of which had only been there eight months, and had this to say a mere four months ago: Chief Revenue Officer CRO Denise Dresser“I just have never seen this level of conviction spread so quickly and consistently within the industries,” Dresser in April, as she was wrapping up her first 90 days on the job. told CNBCDresser likely walked away from a large amount of stock options by leaving after less than a year on the job, which I’m guessing means she decided that staying at OpenAI would, for whatever reason, not be worth getting what I imagine are tens of millions of dollars of stock she would be able to liquidate when it went public. You know, that thing that’s definitely happening. Unless it’s not quite so definiteanymore. Back in late June, OpenAI was “leaning toward” going public some time in 2027, but that was before Anthropic started one of the most-aggressive pre-IPO marketing campaigns I’ve ever seen, The New York Times reported that they thought it would have a $2 trillion valuation and have sigh annualized revenues of $100 billion to $120 billion by end of 2026, an entirely fictional statement made with the intent of pumping their bags, with the FT, for whatever reason, printing it with little pushback. with investors “leaking” to the Financial Times Ed makes the doomer case for OpenAI good and hard in his next few thousand words and spells out many possible consequences of the company’s possible failure, but I want to focus on on particular consequence: what it might mean for our final set of stressed oligarchs, the Ellisons. OpenAI’s Empty Promises Are a Keystone of the Ellison’s Aspirational Hasbara Empire Here’s what Ed says about OpenAI’s obligations to Oracle leaving out the massive money they also owe Microsoft, Alphabet and many other titans of imaginary industry : Though the estimate is from December 2025, Michael Turrin of Wells Fargo estimates that OpenAI’s contribution to Oracle’s Fiscal Year 2027 which just started on June 1 2026 will be around $10 billion, then rising to $39 billion in Fiscal Year 2028. I think a fair estimate here is to put this at around $20 billion. Now, all of this is contingent on Google, Microsoft, Amazon and Oracle building enough capacity to capture that revenue, but if we assume that happens, OpenAI needs more than $147 billion just to handle its expected compute commitments through the end of 2027. … , its collapse will have now-unavoidable economic consequences. The death of SoftBank is a very real possibility. As I discussed in the OpenAI Bubble is much, much higher than anyone wants to think about, at a time when, The likelihood of the vast majority of AI investments going to zero , a venture capital firm that returns per Bloombergthirty centers on the dollaris consideredan above-top-five performer. . Oracle will collapse without OpenAI’s revenueTo not actively and meaningfully discuss the potentialfor OpenAI to collapse is actively irresponsible. To act like there are not significant, existential problems with this company’s economics is to intentionally avoid reality, and whoever is on the receiving end of said ignorance deserves better, be they an investor reading your analyst note or a reader burdened with incomplete journalism. And the reason Oracle’s financial exposure matters even more is that CEO Larry Ellison and his nepobaby failson David have been rapidly assembling one of the most ambitious media empires in American history since 2025. Most of the criticism they get involves their attempts to suck up to the ever-more widely reviled POTUS Trump, but they’ve made no secret of their actual ambitions: advancing Israel’s media agenda in the U.S. of A. So let’s catch up on their latest legal brouhahas. David Ellison Wages PR and Financial War on Blue State AGs Last time I talked about Paramount’s attempt to finalize its acquisition of WBD https://www.nakedcapitalism.com/2026/07/oracle-paramount-wbd-ellison-empire-beseiged-bonds-stocks-saudis.html , I mentioned a number of law suits filed against them. One of those suits, filed by 12 states attorneys general is hogging all of the attention, in part because it’s led Ellison to threaten to pull Paramount out of Hollywood. https://puck.news/david-ellison-has-gamed-out-a-california-exit-plan/Puck’s Matt Belloni broke the story on Monday: Last Wednesday, David Ellison called a lunch meeting on the Paramount lot with his top lieutenants—the 12-member Executive Leadership Team, or ELT, as it’s dubbed internally—and outlined in stark terms the stakes of the Paramount–Warner Bros. merger litigation for each of them. During the hourlong meeting, Ellison first expressed confidence that the company would defeat the case brought by California and 11 other Democratic states, and ultimately close the controversial $110 billion transaction. He also said that, despite the prolonged and costly antitrust battle with the attorney general of his home state, his goal remains to keep the combined company—and the 30,000 or so jobs, including their own—based in Southern California. But, according to two people with direct knowledge of the meeting, he wanted his top people to know that the rumors were true: He had decided to move Paramount Skydance to either Tennessee, Texas, Georgia, or another state he didn’t identify if Rob Bonta, the California A.G. leading the charge, did not come to the table to negotiate a settlement. Further, Ellison told the group, he had set an October 1 deadline to resolve the matter. If Paramount gets nowhere by the date that the so-called $7 million-per-day “ticking fee” begins to accrue, he will move either Paramount or the combined WarnerMount out of California regardless of the eventual outcome of the case. The headquarters will relocate first, he said, assisted by incentives provided by one of the suitors he’s in contact with multiple states , and he’s putting together a five-year plan that would eventually shift most studio jobs to the new home. Paramount’s Ellison-controlled board had already signed off on the move. Belloni also has the most access and some of the best insights in his latest https://puck.news/david-ellisons-calexit-threat-whats-real-whats-not/ which opens with the news that Cinema United https://en.wikipedia.org/wiki/Cinema United formerly known as the National Association of Theatre Owners NATO excluding Paramount from its annual Fall Summit and goes on from there: …that’s just a tiny taste of the backlash and vitriol that has erupted around town… Rob Bonta, the state attorney general, called it “blackmail” before conceding he’s open to a settlement if the company negotiates “in good faith” . The Writers Guild said Ellison’s threat is “precisely why the merger should be blocked.” And my emails and D.M.s have been filled with disbelief that Ellison would leverage the lifestyles and family connections of so many employees as collateral in a legal war. Two separate Paramount executives told me they’d quit rather than relocate. A known screenwriter texted that he’d never pitch the studio again if it leaves town. … The anger is understandable. Paramount has existed in Hollywood proper for 114 years. The studio moved into the current lot on Melrose Avenue in 1926—yes, exactly 100 years ago—and weathered everything from the rise of television to the L.A. riots in 1992, when fires and looting approached the gates, to the chaos and mismanagement of late-stage Sumner Redstone. I guess it’d be fitting if Hollywood’s long, tortured history of M&A—some good but mostly bad—might lead to Ellison’s decision to sell the storied lot.…Despite getting buried by the media and the community this week, Ellison’s move to create political pressure might end up being effective if Bonta comes to the table after months of ghosting. Or it could cause the A.G. to dig in further. Despite the public urging to settle from the state’s next governor, Xavier Becerra, and a mysterious, private chat with the current one, Gavin Newsom, Bonta may feel a trial is a can’t-lose moment, politically. If he wins, he’s a hero to the Elizabeth Warren demo. If he loses, he’s a martyr—even if the practical result is further damage to L.A.’s entertainment economy. And why would there be backlash and vitriol? NEWS: A new report finds that the Paramount-Warner Bros. merger could cost thousands of jobs in Los Angeles alone. According to the report, the merger could "result in the loss of 4,500 film and TV jobs in Los Angeles County over the next three years." It also "estimates that a… pic.twitter.com/24tbg7SCGL — American Economic Liberties Project @econliberties August 19, 2026 He also puts the scope of the combined companies into context: …the combined WarnerMount would not control California. Or Hollywood. It wouldn’t even control the swath of L.A. between Melrose Avenue and Riverside Drive. That tract of land includes Netflix. WarnerMount generated 22 percent of the U.S. box office for all wide-release films over the past two years, if we include A24, Lionsgate, and Amazon MGM which Bonta doesn’t for reasons he still hasn’t explained . In television, the combined company would account for about 20 percent of domestic watch time, if you don’t include YouTube. And in U.S. streaming alone, the Paramount and Warner Bros. Discovery services generated 3.8 percent of viewing in May, per Nielsen. Good enough for fifth place. To close on the most amusing note possible, I thought I’d include this video from the last MAGA loyalists YouTubing at WDW Pro who informed 34,000 of their 213,000 subscribers that the Ellisons are putting weak-ass doomed Hollywood in its place with their likely and genius move to Nashville, Tennessee — coincidentally the new corporate home of daddy’s company, Oracle. Here’s a sample of their perspective, I hope it will bring as many belly laughs to you, dear readers as it did to me: Paramount, Sky Dance, Warner Brothers, music CNN. It’s combined together the size of Disney deciding to leave California. Tens of billions of dollars on the line and it’s happening in real time. 6 weeks until a decision is made. It’s breaking news, ladies and gentlemen. David Ellison is reportedly ready to get out of California. And this could be the collapse the Golden State has been waiting for to find out how does Hollywood go down. It’s been a century of Hollywood, but Holly Weird may have finally stepped too far. Time will tell. Although if Hollyweird is so awful, why these presumably loyal Red Staters want to bring it to Nashville, which is coincidentally a very liberal, Democratic-voting town in its own right. Related Posts 2 comments - TJBuff Wow, let me get my tiny violin. Zitron has made a fairly good case in one of his newsletters though that if OpenAI craters, all the AI labs and Nvidia could join it. And their little dog Oracle, too. Reply comment-4456907 ↓ - doug I am not sure but wonder if this is another California ‘stretched oligarch’? The article doesn’t reach conclusions, but raises a few questions. https://www.the-race.com/business/mark-walter-la-lakers-sale-what-it-could-mean-for-cadillac-f1-team/ https://www.the-race.com/business/mark-walter-la-lakers-sale-what-it-could-mean-for-cadillac-f1-team/ Something is going on. Reply comment-4456914 ↓