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The Almighty Buck The Courts News

Facebook CEO Accused of Securities Fraud 247

Precision noted that Facebook CEO Mark Zuckerberg turned 26 last week, and gets to celebrate by being accused of securities fraud. This goes back to the old Facebook legend that Zuckerberg stole code from other Harvard students.
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Facebook CEO Accused of Securities Fraud

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  • by ultraexactzz ( 546422 ) on Thursday May 20, 2010 @10:27AM (#32279988) Journal
    "You and 54,972 others like this."
  • by smooth wombat ( 796938 ) on Thursday May 20, 2010 @10:27AM (#32279992) Journal

    The fin on top of your head doesn't do what you think it does.

  • Remember, folks (Score:4, Informative)

    by palegray.net ( 1195047 ) <philip.paradis@p ... t ['ale' in gap]> on Thursday May 20, 2010 @10:28AM (#32279996) Homepage Journal
    While Facebook certainly has been in the press an awful lot lately given growing concerns over privacy issues, this is an accusation, not a conviction. From the article:

    The latest unwelcome gift: accusations of securities fraud from former Harvard schoolmates who say he and other Facebook executives tricked them into a supposed $65 million settlement that was actually worth far less.

    He may or may not be guilty of anything, so let's try to keep a cool head in the meantime.

    • Re:Remember, folks (Score:5, Insightful)

      by somersault ( 912633 ) on Thursday May 20, 2010 @10:29AM (#32280030) Homepage Journal

      He may or may not be guilty of anything

      I've never actually done any research into the guy, but from all the stories up here I can pretty much tell he's a douche.

      • At least in the court of public opinion, I think you've got an accurate statement there :).
      • Re:Remember, folks (Score:5, Insightful)

        by Pojut ( 1027544 ) on Thursday May 20, 2010 @10:37AM (#32280174) Homepage

        I gotta say, I'm not all that surprised...think about it, you're just an average college student, and not a few years later you're a billionaire. That's gonna fuck with your ego, no matter who you are.

        • by ElectricTurtle ( 1171201 ) on Thursday May 20, 2010 @10:40AM (#32280238)
          Oh to be so burdened.
        • Re: (Score:3, Interesting)

          by TooMuchToDo ( 882796 )
          He's a billionaire *on paper*. That *worth* could be wiped away in seconds.
          • Re:Remember, folks (Score:4, Insightful)

            by dAzED1 ( 33635 ) on Thursday May 20, 2010 @10:57AM (#32280532) Journal

            yeah, the worst-case scenario could happen, and he could be reduced to just a couple hundred mill. Wouldn't that be a shame :/ I can't imagine trying to live off that much as a 26yo; ramen every day, yuck!

            Do you *really* think that he hasn't diversified at least a little by now?

            • Re: (Score:3, Funny)

              by Anonymous Coward

              "Do you *really* think that he hasn't diversified at least a little by now?"

              He has. Into securities fraud.

            • 26 year old with a company's worth based on expectations alone? No, I doubt he's diversified a huge amount. And if he doesn't get lucky and sell like Myspace, he'll end up with something worthless when the next social whathaveyou comes around.
              • Re: (Score:3, Insightful)

                by postbigbang ( 761081 )

                It's not like his investment is liquid.

                But perhaps if he gets smacked around, the investors get cold feet, maybe Microsoft or Oracle or who knows buys it and makes him kind of rich. As in way-rich. The financing that he has means his share is still pretty good..... that is, until whatever comes after Facebook arrives. Facebook arrived after MySpace, which came after various GeoCities, and so on.

                Facebook has immense number of users that might be happy to find a subsequent provider that does something more, l

            • Re:Remember, folks (Score:4, Interesting)

              by Lumpy ( 12016 ) on Thursday May 20, 2010 @11:20AM (#32280854) Homepage

              no. 26yr old = not enough experience in the world.

              It's why he's know as a raging ass to many that deal with him. he's outright cocky and it will bite him in the butt.

              Honestly, after reading the accidental billionaires book http://www.nytimes.com/2009/07/20/books/20maslin.html [nytimes.com]
                I am certain that I would not want to have ever had to deal with the man. Every account of him makes him feel "slimey" and sets off all my red flags.

          • Kinda like some trader accidentally entering "B" instead of "M" ;) ?
        • Re:Remember, folks (Score:5, Insightful)

          by lorenlal ( 164133 ) on Thursday May 20, 2010 @10:56AM (#32280522)

          Especially when you make that money by screwing other people over in the first place (allegedly).

          BTW - I'm not a huge fan of the fact that the summary refers to the allegations as "legend." That strongly implies that it never happened... And there's decent indication that it may have.

          • Re: (Score:3, Interesting)

            by schmidt349 ( 690948 )

            The key word there is the "allegedly." And no, there is absolutely no truth to the allegation. The Winklevosses are upset about how the settlement turned out for them and they're rattling the cage to see if any more money will fall out. They're being dunned by their lawyers for non-payment of legal fees.

            • "And no, there is absolutely no truth to the allegation."

              And you know this how?

            • Yeah, sounds like someone is just trying to play their "Share the Wealth" card.

              Incidentally, I just noticed that some time ago the game of Life(TM) had something of a makeover, and no longer has those little legal "Share the Wealth" and "Exemption" cards. Which I applaud for not teaching the next generation to be a bunch of litigious little bastards.

              They've also done some interesting things with employment, salary, and education that helps randomize stuff up a bit, so whomever lands on the Doctor/Lawyer sq

        • Re:Remember, folks (Score:5, Informative)

          by blind biker ( 1066130 ) on Thursday May 20, 2010 @11:09AM (#32280668) Journal

          He was not yet a billionaire when he called the Facebook users "dumb fucks" [businessinsider.com]. That's right, he was 19, long before those billions would have hit his ego too hard, and already calling the users of his service dumb fucks.

          Once that sinks in, I think we can conclude that he has been a douche all along.

          • by Lumpy ( 12016 )

            The funny part is that he has pissed off all his users enough that as soon as there is something that is even just as good as facebook, they will flock to it like crazy leaving him with nothing.

            The only reason most people I know are on facebook are because of friends. and when friends start flocking elsewhere to a interface that has less suckage as facebook.... suddenly his empire becomes a moist turd in the bottom of a subway toilet.

            • by jgs ( 245596 )

              leaving him with nothing.

              ... except a lousy few billion in the bank, assuming he's had enough sense to diversify.

              Yeah, the laugh will definitely be on him.

          • By the time people are 19 or 20 their personalities for the remainder of their lives are pretty much set. It takes some catastrophic event to change it (and rarely occurs). So yes, you're right. He was a douche all along: he just needed a reason to be extroverted about it. That reason happened to be fame and money.

            Once a douche always a douche.
        • by fishexe ( 168879 )

          I gotta say, I'm not all that surprised...think about it, you're just an average college student, and not a few years later you're a billionaire. That's gonna fuck with your ego, no matter who you are.

          Actually, from what I hear he had that kind of ego from the beginning. Read some of the leaked emails if you don't believe me.

        • http://en.wikipedia.org/wiki/Michael_Dell [wikipedia.org]

          sure his company has acted douchey, but i don't think the guy can be called a douche. its been a long time since he founded dell in his dorm, and no one has any real dirt on the fellow. sure he's not a saint, but again, not a douche

          http://en.wikipedia.org/wiki/Steve_Wozniak [wikipedia.org]

          wozniak is pretty much the anti-douche. the woz is pure awesomeness. even steve jobs: yeah, your average apple cultist is pretty much the definition of upper middle class douchebag, but steve jobs

        • Re:Remember, folks (Score:5, Informative)

          by spire3661 ( 1038968 ) on Thursday May 20, 2010 @01:06PM (#32282580) Journal
          "The measure of a man is what he does with power" - Plato. As true 2000 years ago as it is today.
    • In other words, either an effing HUGE group of people is out to slander that guy into oblivion or at the very least some of the accusations have to be true.

      Occam's Razor tells me which one is more likely.

      • Or there are some people who really want to get their hands on more money, which also qualifies as a pretty simple explanation. We don't really know either way, and that's why we have a court system.
    • "Accused" is in the title.

      Now I realize this is slashdot and people don't read the articles, or even the summaries sometimes. But I think we can assume they read the fucking title.

      • Man, I don't assume anything about Slashdot, having seen people manage to screw up just about every aspect of a story.
      • Now I realize this is slashdot and people don't read the articles, or even the summaries sometimes. But I think we can assume they read the fucking title.

        Are you kidding? A lot of them don't even read the comments. It's the only explanation for many of the replies I've gotten some of my own posts--replies that show a complete disregard for or ignorance of what I actually said.

    • by elrous0 ( 869638 ) *
      The evidence is pretty clear that he stole code from UConnect. They even caught him openly bragging about it (which also provides further evidence that he wasn't bright enough to code in the first place). If you're going to steal, at least put some distance between yourself and the people you stole from--and keep your mouth shut about it.
      • I don't think this case is about stolen code; it's described as being about a dispute regarding the settlement that resulted from the previous dispute over that (round and round and round we go I guess).
    • by dzfoo ( 772245 )

      Oh HAI!

      Muz be ur frist time heer!

      Welcom to /. I hope u liek it.

            KTHXBAI

  • by Thanshin ( 1188877 ) on Thursday May 20, 2010 @10:28AM (#32280012)

    Those who desire to steal securities in order to gain freedom will not have, nor do they deserve, either one.

  • by Combatso ( 1793216 ) on Thursday May 20, 2010 @10:30AM (#32280038)
    I bet he will regret the 'Poke' feature if he does time
  • by darkmeridian ( 119044 ) <<moc.liamg> <ta> <gnauhc.mailliw>> on Thursday May 20, 2010 @10:31AM (#32280068) Homepage

    I didn't see anything in the article that suggests he was accused of securities fraud, which generally means an accusation from the SEC for something like insider trading. Ripping off counterparties in a settlement deal may not be great behavior (even though the plaintiffs' lawyers should have realized this a lot sooner than they did) but it is not the same as saying there was securities fraud. Again, it sounds like the article is flamebait or the author just has no idea what he's talking about.

    • by Fnkmaster ( 89084 ) on Thursday May 20, 2010 @11:01AM (#32280582)

      I am not a securities lawyer, but the SEC 1934 Act allows private civil suits regarding securities fraud. This act has been amended and reformed and affected by case law, but you can get the basic gist of modern requirements for civil securities fraud lawsuites here [wikipedia.org].

      The securities don't have to be publicly traded. You don't have to sit around and wait for the SEC to investigate. If somebody made material misrepresentations in connection with the sale of securities, that's enough to meet the basic threshold of being subject to this law and open to civil suits. Then there are just a series of bars to get over regarding showing that the person knowingly caused you to lose money and had the intention of screwing you.

      These things are expensive to litigate, so the stakes have to be high. Your average $250k angel investment gone wrong isn't going to be something you bring to court. A class action representing thousands of shareholders who each lost hundreds of thousands of dollars in a publicly traded company, however, has enough money at stake to see this sort of lawsuit fairly frequently.

      This case is only unusual in that most parties to large private investments on this scale (tens of millions of dollars) are private equity firms or venture capital funds and they generally can do their own due diligence on transactions in the tens of millions of dollars and can afford to write off the expected percentage of complete losses and partial losses. In this case, the suing party took securities that may have been misrepresented as settlement for a lawsuit, and presumably didn't have the resources on hand to conduct their own due diligence.

      So I can't say for certain whether a judge will allow this case - are securities offered as part of a settlement being "offered for purchase or sale"? You'd have to ask a lawyer to tell you whether that is technically the case, but if they accepted the securities in lieu of cash, there might be a case for that.

      But just because you don't hear about this kind of case terribly frequently doesn't mean it's total bullshit or that the author is flaming or an idiot.

      • Unfortunately this might take a while to settle. Even if the terms of the settlement was all written down in clear language: "Party 1 shall receive common stock" ie, lawyers can argue for years about it. See Novell v SCO.
    • by elrous0 ( 869638 ) *
      The plaintiffs are alleging that he knowingly overstated the value of Facebook stock in his earlier settlement. That's definitely a SEC no-no.
  • by number6x ( 626555 ) on Thursday May 20, 2010 @10:35AM (#32280138)

    Bill Gates stole code for from the dumpster for his BASIC compiler that he based his fortune on, why should Zuckerberg be investigated when Gates isn't?

    When will billionaires ever get a fair shake in this world?

    • Re: (Score:2, Funny)

      Because the dumpsters litigation was trash...

    • In the end, it's not really the code that matters much anyway. Apple has much better code than Microsoft, and yet Microsoft has the largest market share. IE has huge marketshare, even though it's been the worst browser for many years, it's only now starting to fail. Red hat and Mandriva both have Linux at the core (Mandriva actually started as a fork of Redhat) yet Redhat is doing well, and Mandriva is approaching bankruptcy. Code matters very little in the end, and there's a lot more to creating a good
    • by fishexe ( 168879 )

      ...why should Zuckerberg be investigated when Gates isn't?

      When will billionaires ever get a fair shake in this world?

      Gates was investigated, then when we got an irrationally pro-business president in the WH the DoJ dropped the case even though they were winning.

      Billionaires will get fairly cut down to size when we stop electing Republicans.

  • How could anyone settle for only $65mil? God I don't think I'd be able to live with that small sum of cash.
    • They're Harvard graduates coming from a family that's very chummy with the Fortune 100 [winklevoss.com] and can apparently afford lawyers that can take on a billion dollar company. $65 million is probably chump change for them. The overprivileged fighting among themselves for a bigger piece of the pie; couldn't care less.

  • Will we see his face on a MUGSHOT soon?

  • by Rogerborg ( 306625 ) on Thursday May 20, 2010 @10:56AM (#32280530) Homepage

    A bunch of arrogant entitled Haaaarvard douches get butt-humped by the biggest douche amongst them, then spend the rest of their natural lives giving all of their money to lawyers until none of them have anything except crack habits and an autobiography in the bargain bin.

    I mean, you can't buy entertainment like this. It's win-win, especially if they all lose.

    • A bunch of arrogant entitled Haaaarvard douches get butt-humped by the biggest douche amongst them, then spend the rest of their natural lives giving all of their money to lawyers until none of them have anything except crack habits and an autobiography in the bargain bin.

      I mean, you can't buy entertainment like this. It's win-win, especially if they all lose.

      And to top it all off, the man's name means "sugar mountain".

  • The whole story (Score:4, Insightful)

    by schmidt349 ( 690948 ) on Thursday May 20, 2010 @10:59AM (#32280566)

    The title of this article is totally misleading. The Winklevosses agreed to a settlement involving a payment of cash and a quantity of Facebook stock assuming a certain valuation. That valuation was based on the Microsoft purchase of a small chunk of the company that, if you bought all the stock at the same price, would make it work $15 billion.

    Obviously that valuation was unrealistic, but the Winklevosses agreed to it *because their lawyers told them to.* Their law firm didn't complete their due diligence or else they may have wanted to renegotiate the deal. But that's not even remotely Facebook's fault.

    The reason for this accusation is that the Winklevosses have to pay their lawyers a contingency fee based on the higher valuation of the stock. This will result in a net loss to them. They're pissed off at this turn of events, so they're casting aspersions on Facebook's CEO and demanding a securities investigation. But don't forget that they're a pair of moneyed aristocrats from a family of moneyed aristocrats (read: spoiled brats). So don't think of them as wronged parties because they're not.

    Facebook was no more the Winklevosses' idea than Windows Aero or Mac OS Aqua or Enlightenment or KDE were the ideas of Xerox PARC.

    • Re: (Score:3, Informative)

      by nacturation ( 646836 ) *

      Obviously that valuation was unrealistic, but the Winklevosses agreed to it *because their lawyers told them to.* Their law firm didn't complete their due diligence or else they may have wanted to renegotiate the deal. But that's not even remotely Facebook's fault.

      If I'm reading the article correctly, it's not about the valuation but about what class of stock they receive:

      "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."

  • when friendster looked like it was going to take over the internet

    there once was a time when myspace looked larger than google

    and, in a few short years, someone will say something about facebook, probably as a joke, and someone else will say "facebook? what's that?"

    the realm of social networking is true to what it is: an endless party, hosted by one rich kid whose parents are on vacation after another, no one claiming the right to say they are truly in control for very long, forever

    what i envision is a permanent progression, every 5-10 years, a new friendster/myspace/facebook taking over the mantle of darling of the ball, and then rudely discarded and abandoned, in endless succession, forever

    • Re: (Score:3, Insightful)

      by Hurricane78 ( 562437 )

      Not with the plans I have in mind... ...it will literally become impossible to create a “separate” site like this.
      They will be part of a common (full-privacy-enabled) net, whether they want it or not. Even whether they buy a law against it or not.

  • I hear Darl is really good at claiming stuff is his when it really isn't..

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