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Facebook’s “Old” Owner?

By Paper Money on 07/13/2010 – 3:54 pm PDTLeave a Comment

Although this is not a macro-econ story per se, the numbers and potential outcome is so fantastic I felt compelled to post.

It’s been somewhat wrongly reported that Facebook creator Mark Zuckerberg is facing allegations that a contract he entered into back in 2003 granted web developer Paul Ceglia 84% ownership interest in Facebook, the wildly popular social networking website.

In fact, most of the reporting on this story has gotten the contract terms completely mixed.

The actual complaint filed June 30 2010 states that Paul Ceglia paid $1000 to Mark Zuckerberg for a 50% interest in Zuckerberg’s business, including “the face book” (the complaint specifically cites and further stipulated that Paul (the purchaser) would receive a 1% interest for each day after January 1st 2004 until the website was completed.

The complaint states that the website was complete February 4th 2004 which would have accrued another 34% ownership interest to Paul Ceglia for a grand total of 84% interest.

Finally, the complaint alleges that Zuckerberg eventually transferred the original website (and business) from to and ultimately into Facebook, Inc. which the complaint claims is simply a continuum of Ceglia acquisition from the date of contract until the present time.

Provided that the attached “Work for Hire” contract and cashed check exhibits are authentic, it looks like Facebook may very well have been developed under a simple and typical, albeit meager, “work made for hire” contract agreement between Zuckerberg and Ceglia with Ceglia buyer of the development services and Zuckerberg the seller/developer/contractor.

Apparently, the complaint must have thus far been convincing as a Supreme Court judge of New York granted a restraining order prohibiting Facebook and Zuckerberg from transferring any assets.

Clearly, it will be interesting to watch this case play out but given that Facebook has a current valuation between $5 and $10 billion, Ceglia (and his attorney) stand to gain quite a haul from this suit.

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