In June 2013, New York Magazine posted a blog article entitled “Wall Street Is Obsessed With Snapchat.” The article largely ignored discussion of the potential use of Snapchat for insider trading, focusing instead on the app’s usefulness in avoiding the circulation of compromising pictures of social media-obsessed young bankers. On July 17, however, CNBC’s Jim Cramer brought the potential of Snapchat insider trading to light when he asked the U.S. Attorney for the Southern District of New York, Preet Bharara, about precisely this possibility. Bharara hadn’t heard of Snapchat. His response was that, “to the extent that people can figure out ways to communicate, either by IM or Snapchat or some other method, law enforcement needs to think of that . . . but nobody should feel safe because they're using a particular method of communication.”
Bharara’s lack of knowledge of the two-year-old app is not surprising—keeping abreast of and control over technological channels is a never-ending game of regulatory whack-a-mole. But it does underscore the importance of keeping current on what apps are popular and, crucially, how those apps work, in order to ensure that legal practice and compliance efforts evolve to reflect the ever-changing technological landscape.
Snapchat provides a salient example of why understanding how new apps work is as essential as knowing the apps exist in the first place. As of October 2013, Snapchat has asserted that, while unopened pictures are retained on the servers (and therefore available for subpoena), once a picture is opened, it disappears not only from the phone, but also from Snapchat’s servers. One can easily imagine a host of potential risks: sharing of material nonpublic information; dissemination of trade secrets; employee sexual harassment—all with virtually no evidence remaining.
From a litigation perspective, the disappearance from the servers also raises the problems of data retention and spoliation. As The E-Discovery Blog asks: “Do parties have a duty to preserve snaps when they have little to no control over the ‘deletion’ of the data?” And could the disappearance of data give rise to adverse inferences due to spoliation?
According to Snapchat’s Law Enforcement Guide, the company does retain some user information, which may be useful in terms of compliance, and is something litigators should be aware of when advising clients: Snapchat username, email address, phone number, Facebook account (if synced), username log of the last 200 snaps sent and received, Snapchat account creation date. This data is, however, only retained for active users—the company cannot recover even this basic information from a deleted account.
Given that Snapchat recently turned down a $3 billion dollar offer from Facebook, chances are that the company won’t be doing a disappearing act anytime soon. And in turn, legal issues arising from or involving the unique nature of Snapchat’s functionality will doubtlessly emerge. Knowing that new apps like Snapchat exist and knowing how they work are crucial steps in decreasing the likelihood that your client will be in the unfortunate position of being that first test case.