Facebook CEO and Fraud Allegations

Facebook has been having some bad publicity of late with the security issues, and now the CEO Mark Zuckerberg has to deal with his former Harvard schoolmates accusing him of securities fraud. They are saying he and other Facebook executives duped them into a $65 million settlement that turned out to be worth far less.

Owen Thomas of Venture Beat.com is reporting that brothers Cameron and Tyler Winklevoss and Divya Narendra are saying that they hired Zuckerberg to help on their own social network ConnectU, but he delayed the project and used the code to start his own idea that he then called The Facebook.

Facebook and ConnectU reached a tentative settlement for $65 million after years of litigation, but the ConnectU team said the agreement was never finalized, and that the ownership of ConnectU should never been awarded to Facebook.

The cofounders of ConnectU are saying that because the settlement was to be paid in common shares instead of preferred shares, these where valued by Facebook at 75% less for calculating taxes, this cut the offer in half. The shares value was based on Microsoft’s purchase in 2007 of $15 billion of preferred shares.

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