Chamath Palihapitiya: Facebook goes wrong way at 'intersection of business logic and morality'

Facebook finds itself at a crossroads as regulators and lawmakers express concerns on a number of fronts about the power of the social media giant, Chamath Palihapitiya told CNBC on Monday.

"I think that they're at a very difficult point. It is the intersection of business logic and morality," the ex-Facebook executive turned Facebook critic said. "At some point your morals and ethics conflict with what the right business logic is."

Palihapitiya, who severed in various management roles at Facebook from 2007 to 2011, came out about two years ago against the direction his former company was taking, saying social media is addictive and bad for society. (Palihapitiya is also a minority stakeholder and board member of the NBA's Golden State Warriors.)

Shortly after leaving Facebook, Palihapitiya started Social Capital, raising and investing venture funds in then-startups including Slack and Box. In September 2018, after a tumultuous few months, he closed the firm to outside money.

On Monday, in a second act, Palihapitiya saw the merger of his special purpose acquisition company and billionaire Richard Branson's Virgin Galactic come to fruition, with the space tourism stock soaring in its New York Stock Exchange debut.

Appearing on "Squawk on the Street" with Branson to talk about space, Palihapitiya was also asked about Facebook and whether the social network has been moving down a better road lately.

Companies have a choice to take a stand or "just take a hear-no-evil-see-no-evil approach and we're going to maximize business value," said Palihapitiya. "So far, their choices have been the latter," he said of Facebook.

Palihapitiya's comments come following Facebook co-founder and CEO Mark Zuckerberg's grilling on Capitol Hill last week over the company's libra cryptocurrency project.

Zuckerberg defended libra and the company at-large as Facebook tries to rebuild user trust after data privacy and security scandals plagued the company since the Cambridge Analytica scandal, in which the data of millions of users was obtained without authorization while the research firm was working for the 2016 Trump campaign.

The Cambridge Analytica debacle resulted in a Federal Trade Commission investigation and a $5 billion fine of Facebook over online privacy.

Meanwhile, federal government regulators, state attorneys general and lawmakers on Capitol Hill are also conducting investigations into whether Facebook uses its market dominance to stifle competition.

Facebook did not immediately respond to CNBC's request for comment.

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