I still remember the big splash that was made when the news about Facebook settling with ConnectU to the tune of $65 million and like a lot of other folks considered the matter closed.
Well it seems that we may have been a little premature with that assumption as there are now serious charges of securities fraud being leveled against Facebook and Zuckerberg. The charge stems out of the deal which saw the ownership of ConnectU being transferred to Facebook and the settlement of $65 million, which was based on the valuation of Facebook being worth $15 billion. The settlement was in the form of Facebook common shares rather than the preferred shares the original ConnectU cofounders were told it would be.
Given that Facebook itself values those common shares at roughly 75 percent less for tax purposes the contention is that the settlement ended up being only half of the agreed amount. This apparently is where the securities fraud charges could come into play.
This is definitely a nightmare that just doesn’t seem to want to leave Facebook alone but as Owen Thomas at VentureBeat asks
The real question here is why Facebook’s lawyers haven’t succeeded in making this lawsuit go away. Before, ConnectU’s founders were just after a piece of the Facebook pie. Now, the stakes keep getting higher as the case drags on. An actual indictment on securities fraud would make it impossible for Zuckerberg to remain Facebook’s CEO if it were to go public. However unlikely that is, why take the risk?
Tie this in with a growing discontent from within the Facebook ranks including the upper management over Facebook’s current mess surrounding privacy issues things could get a little rough for Emperor Zuckerberg.