MGM sues FTC over 'Spiders' hack investigation, demands apology from Khan
MGM Resorts International (NYSE: MGM ) today sued the U.S. Federal Trade Commission (FTC) over its investigation into cybersecurity breaches that plagued the casino giant in 2023. The gaming company also asked FTC Chairwoman Lina Khan to recuse herself from the case due to a possible conflict of interest.
Last September, MGM's internal cybersecurity and data systems suffered a hack following a hack by the notorious Dispersed Spiders group, a group of domestic and foreign hackers known for wreaking havoc on companies and governments. About a week's hiatus. While the gaming company didn't pay the data thieves anything to mitigate, its third-quarter profits did fall by $100 million and it took a $10 million one-time charge related to the incident.
In January, the FTC issued a civil investigative request (CID) to the Las Vegas-based gaming company, requesting a trove of data and documents related to the incident. The following month, MGM attempted to deny the request, noting that some of the information requested by the FTC could jeopardize the gaming company's efforts to assist law enforcement agencies in bringing criminal charges against Scattered Spider.
MGM also asked Khan to recuse herself from the case because she and several FTC employees were guests at the MGM Grand hotel on the Las Vegas Strip. A venue employee reportedly asked Khan and her staff to write their credit card numbers on pieces of paper, prompting the FTC chairman to ask what steps the venue was taking to protect customer information. In court documents filed earlier today, MGM argued that Khan is a potential witness and that participating in the case would create a potential conflict of interest from an enforcement perspective.
MGM says FTC request is flawed
In addition to seeking Khan's recusal, MGM argued that the FTC's CID filing violated his Fifth Amendment rights and that the commission was applying laws that have never applied to gaming companies.
The Bellagio operator noted that the commission is trying to take advantage of the "red flag rules" and "safeguard rules" that apply to financial services firms and other companies that make loans. MGM argued that the issuance of chip tokens to guests did not amount to the issuance of credit and that the tokens were not protected by red flags and safeguard agreements.
The FTC claimed that the legal basis for the CID was two financial services regulations, neither of which, on its face, applied to MGM. "On this basis, and relying generally on Section 5 of the FTC Act, the FTC is seeking to compel MGM to provide information in more than 100 categories," MGM's filing said.
MGM added that despite Khan being a guest at the MGM Grand during the data breach, her refusal to recuse herself from the case and the committee's refusal to compel her to do so violated her Fifth Amendment rights. The gaming company also claimed that Khan attended hearings regarding her involvement in the case against MGM.
MGM is ready to partner...in some way
MGM has shown a willingness to cooperate with the FTC investigation, despite the commission's request for reams of data and documents that could take weeks to complete. The company asked the U.S. District Court for the District of Columbia to give it more time to comply or force the FTC to drop the Bureau of Criminal Investigation's request.
The Cosmopolitan operator called the 11-day deadline for the FTC to comply with CID requirements "clearly unworkable," while also calling the FTC's challenge to CID's procedures "chilling."
"The FTC's investigative powers are not unlimited. It may conduct investigations only under specific statutory authority," MGM said in the legal filing. “MGM’s CID was largely based on seemingly inapplicable rules, with no attempt to define which parts of the CID involved which purported sources of power.”
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Source: www.casino.org
