A businessman who claims Mark Zuckerberg scammed him out of a $2,000 controlling interest in Facebook has amended his federal lawsuit, in an attempt to cash in on a company now valued at $65 billion.
Paul Ceglia, a New York businessman with a sketchy past, says he owns half of Facebook after having paid Zuckerberg $2,000 to fund the site. In his new complaint, he alleges that Zuckerberg tried to weasel out of the contract by lying about how well the site was doing.
Ceglia is now offering up what he calls damning e-mails in pursuit of what he says is rightfully his, after agreements and understandings with a young Zuckerberg. Some might think it's all a sour-grapes-grab in the fashion of a failed suit by the Winklevoss twins, who also crossed paths with Zuckerberg at Harvard in the earliest days, and whose legal attempt to prove they were wronged was snidely dismissed by a judge only Monday.
Indeed, one would be tempted to dismiss Ceglia's suit as ridiculous -- except that Zuckerberg did do work for him, Ceglia purportedly has e-mails from Zuckerberg confirming the signed contract, and Ceglia is now represented by DLA Piper -- one of the nation's most well-respected law firms.
Which is to say, this is either an elaborate con job or Ceglia has proof of the biggest corporate thievery since Bernie Madoff.
The updated complaint includes purported snippets of e-mails showing Zuckerberg using portions of the code he was paid to create for Ceglia's venture "StreetFax," as part of what was then called "TheFacebook." After Ceglia relented on some contractual penalties that put his ownership at 80 percent, Zuckerberg finally launched the site in 2004. Zuckerberg then grew testy with Ceglia, telling him the site was failing, that he was planning to quit, and offering to give Ceglia his money back in exchange for the equity.
Facebook says the suit is bogus, and the e-mails are fake.
"This is a fraudulent lawsuit brought by a convicted felon, and we look forward to defending it in court. From the outset, we’ve said that this scam artist’s claims are ridiculous, and this newest complaint is no better," said Orin Snyder of Gibson, Dunn & Crutcher, a law firm representing Facebook.
When Ceglia filed the suit in July 2010, Facebook also dismissed it out of hand, saying "Mark has made it clear that Ceglia’s claims are absurd, and we strongly suspect the contract is forged."
But now Ceglia, who was indicted in 2009 for allegedly defrauding people who prepaid him for heating supplies, is back -- either with a scam that could land him in prison, or with a fantastic story that shows that Facebook was founded not just by screwing over Harvard jocks, but by flat-out fraud.
Part of Ceglia's new proffer are e-mail exchanges Facebook already says are not real. After some back-and-forth about business models, Zuckerberg allegedly sent this e-mail with the subject line "Urgent! Let's Talk" on November 22, 2003.
When the site finally launched on February 4, 2004, Zuckerberg quickly turned on Ceglia, who was pushing the site to sell Harvard-branded mugs and sweatshirts. Two days later, he allegedly wrote:
Ceglia shot back:
Then, the suit alleges, Zuckerberg hacked into and sabotaged Ceglia's StreetFax site, as revenge for money he felt he was owed. Zuckerberg also allegedly hid from Ceglia that Facebook was taking off and that he was headed to Silicon Valley for the summer to work full time on Facebook.
April 6, 2004, as asserted by Ceglia:
Ceglia allegedly responded:
Months later, while building out Facebook and learning the Silicon Valley ropes from Sean Parker, Zuckerberg allegedly sent this fence-mending e-mail that attempts to buy back Ceglia's stake -- as an olive branch, without mentioning how the site had taken off:
At the time, Facebook was seeking investment for his company, and a week later incorporated Facebook in Delaware, ahead of landing Peter Thiel as an investor. The suit alleges Ceglia never accepted a repayment of investment in The Face Book project and never relinquished his 50 percent interest.
Ceglia's suit does not however explain why it took him so long to file suit, which came nearly after the statute of limitations expired. Ceglia has claimed that he hadn't heard of Facebook's success and only found the contracts when going through his papers.
Ceglia's attempt to get half of Facebook -- a company now estimated to be worth somewhere between $55 and $85 billion -- also faces the difficult problem of the doctrine of laches. That's a legal principle that says if a person sleeps on their rights, it's unfair for them to show up later and demand everything.
Ceglia's case is nearly textbook example of this, so it's unlikely that even if all of the allegations are true that Ceglia could win half of Facebook now. But if even some of this evidence is true, Ceglia's going to get a chunk, a decent chunk. And probably a movie deal as well.
Photo: Gavel sculpture (Andrew Scott/Flickr)
See Also:- Zuckerberg ‘Quite Sure’ He Didn’t Sign Away Facebook Control
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- Why Mark Zuckerberg Should Like The Social Network
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