MGM Resorts Sues FTC, Alleges Conflict of Interest in Cyberattack Probe

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In an emergent twist in the saga of cybersecurity breaches, MGM Resorts International, a global giant in the gaming industry, initiated a lawsuit today against the Federal Trade Commission (FTC). This lawsuit pertains to an ongoing FTC investigation into a disruptive 2023 cybersecurity breach that hounded MGM. The gaming magnate has further escalated matters by insisting that FTC Chairwoman Lina Khan step down from the case due to potential conflict of interest.

Last year in September, MGM found itself at the mercy of the infamous hacker syndicate, ‘Scattered Spider’. As a result, an approximately week-long hiatus ensued in its internal cybersecurity and data systems. Famed both domestically and in international circles for its relentless blitzkrieg on companies and governments alike, this clandestine group managed to wreak severe havoc on MGM’s operations. Resolute in its stand against data piracy, MGM refrained from acquiescing to the thieves’ demands, choosing instead to shoulder a staggering loss of $100 million in third-quarter earnings and a one-time additional expenditure of $10 million linked to the incident.

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The FTC jumped into action in January whereupon a Civil Investigative Demand (CID) – a request for extensive data and documentation relevant to the case – was issued to MGM. The Las Vegas-based gaming company attempted to push back against this demand the following month, voicing concerns that complying with the FTC might inadvertently impede their progress in aiding law enforcement’s pursuit of the ‘Scattered Spider’ gang.

Going one step further, MGM has pushed for the recusal of Chairwoman Khan from the case. The root cause of this demand lies in an occasion when Khan, along with several FTC officials were guests at the MGM Grand – an illustrious hotel in the heart of the Las Vegas Strip. MGM’s argument is predicated on the claim that Khan being a potential witness and simultaneously partaking in active enforcement of the lawsuit presents a conflict of interest.

MGM has also made allegations that its Fifth Amendment rights were undermined given the nature of the FTC’s CID request. It contends that the FTC has imposed certain regulations that have never previously been applied to a gaming company. The FTC’s quest to utilize the ‘Red Flags Rule’ and the ‘Safeguards Rule’ – both generally employed in the realm of financial services companies or corporations that allow credit – was met with refutation from MGM. The casino operator’s main bone of contention was that providing guests with markers for chips does not equate to credit extensions, and hence such transactions should not fall under the purview of the aforementioned rules.

MGM is further dismayed by what they see as a violation of their Fifth Amendment rights. Allegedly, Khan’s refusal to recuse herself – and the FTC’s refusal to coerce her into stepping down despite the potential conflict of interest as a result of her being a guest at the MGM Grand during the data breach – have fanned the flames of this dispute.

However, MGM has demonstrated a nuanced stance by signaling some degree of willingness to cooperate with the FTC probe. Given the sheer volume of data and documents that the FTC had requested – and the associated substantial time investment – the company has appealed to the U.S. District Court for leniency. The proposal requests either a time extension for compliance or a leveling of the playing field through a complete retraction of the CID request by the FTC.

Branded as ‘patently impracticable’ and a ‘chilling exercise,’ the 11-day deadline to comply with the FTC’s demand has been questioned by the Cosmopolitan operator. Striking a defiant note, MGM concluded by stating that the FTC’s investigatory authority is not unbounded and should be restricted to activities invocated by explicit statutory grants of authority. They call into question the validity of a CID demand predicated upon what they perceive to be a miscategorization of MGM’s trading practices.