Facebook CEO Faces Accusations Of Securities Fraud

[onehandle]

Source: Huffington Post

Zuckerberg is now facing allegations of securities fraud regarding the out-of-court settlement Facebook made with a rival company whose owners claim Zuckerberg stole their source code.

These allegations have followed Zuckerberg since his Harvard days, when he was hired by a student-run dating website called Harvard Connection (now called ConnectU), which at the time was similar to Zuckerberg's startup TheFacebook. Tyler and Cameron Winklevoss, the creators of ConnectU, brought suit against Facebook in 2003. They settled for a reported $65 million in 2008 and turned ConnectU over to Facebook.

The Winklevoss twins are now trying to appeal their settlement on the grounds that they were shortchanged by Facebook. VentureBeat has the details:

'The ConnectU cofounders are arguing that Facebook executives and lawyers presented the cash-and-stock offer's value as $65 million, relying on a valuation of $15 billion that Microsoft paid in 2007 when buying preferred shares in the company. The settlement, however, was to be paid in common shares, not preferred shares, which Facebook itself valued at roughly 75 percent less for the purposes of calculating taxes on stock-based compensation -- cutting the settlement's offer roughly in half.'

Read more: http://www.huffingtonpost.com/2010/05/20/facebook-ceo-faces-accusa_n_583013.html

[Ian David]

1. Let's start a facebook page to pray for him to be convicted! n/t

[Blandocyte]

2. Will he have to work on a prison Farmville if convicted?

[naaman fletcher]

3. well sorry...

"'The ConnectU cofounders are arguing that Facebook executives and lawyers presented the cash-and-stock offer's value as $65 million, relying on a valuation of $15 billion that Microsoft paid in 2007 when buying preferred shares in the company. The settlement, however, was to be paid in common shares, not preferred shares, which Facebook itself valued at roughly 75 percent less for the purposes of calculating taxes on stock-based compensation -- cutting the settlement's offer roughly in half.'"

that's just dumb on the part of the ConnectU cofounders, it's not securities fraud.

[Jim Lane]

4. Maybe, maybe not.

If Facebook affirmatively misrepresented the terms of a deal with Microsoft, then, whether or not that was securities fraud, it could well have been fraudulent inducement, which is a recognized basis for setting aside a contract.

If the court agrees with that argument, then the settlement would be nullified. Facebook would be entitled to the return of the cash and stock it paid to the ConnectU people, and their lawsuit would be reinstated (unless, as would not be surprising, the parties negotiated a new deal).