6 ms·

Zuckerberg sued over privacy scandals, alleged insider trades

187 points by mzs 8y ago

stefanmichael 8y ago
It appears that there is probably not any insider trading going on in this case. However, does anyone else have a thought of "what motivation does a multi billionaire have to insider trade?" when reading headlines like this? It's confusing why you would try to eek out that little bit of extra value, there is no incentive.
- robdachshund 8y ago
  Ask intels last CEO
- elliekelly 8y ago
  This is a derivative suit (civil, not criminal) brought by a shareholder alleging Zuckerberg violated his fiduciary duties to shareholders in a number of ways. One of the alleged ways is insider trading. This is very different from the DOJ alleging criminal insider trading/market manipulation. While this isn't a criminal insider trading case and delayed disclosure is not the typical insider trading allegation it's also not a stretch by means. Complaint for anyone interested: https://images.law.com/contrib/content/uploads/documents/394/4694/Feuer-v.-Zuckerberg-Complaint.pdf https://images.law.com/contrib/content/uploads/documents/394...
  - anticensor 8y ago
    He is the biggest shareholder and has the supermajority of voting shares, how can he violate his own benefit? He can only violate fiduiciary duties towards smaller shares.
    - elliekelly 8y ago
      You've actually just made me realize I overstated his duty to shareholders in my original comment but it's too late to edit. My apologies. A director doesn't owe a fiduciary duty (which is the highest standard of care one person can owe another) but a duty of "care and loyalty" which is a step below a fiduciary. The outcome is the same though. A director's "duty of loyalty" means that he or she cannot personally benefit at the expense of the corporation or it's shareholders. The number of shares he owns and the voting power is irrelevant as the duty applies to all shareholders.
- tombert 8y ago
  Presumably the same reason that multi-billion dollar corporations (and people for that matter) spend a lot of time and resources lobbying the government to pay lower taxes. Once you've hit the billion-dollar mark, you effectively have infinite money for most tangible purposes, and yet the drive to get more money continues. No idea if Zuckerberg is guilty, but I don't think "well he's already loaded" is a very good reason to assume innocence.
  - JohnFen 8y ago
    > Once you've hit the billion-dollar mark, you effectively have infinite money for most tangible purposes, and yet the drive to get more money continues. There is an amount of wealth (and I think it's substantially less than a billion dollars), past which gaining more wealth won't improve your standard of living at all. However, most people who hit that continue to strive to increase their wealth. I think that this is because the sort of person you have to be in order to accumulate a large amount of wealth is the sort of person who isn't interested in the wealth in the way ordinary people are. They are interested in increasing their power, and in our society, wealth is power. I also think that past a certain point, many wealthy people are effectively engaging in a competitive game with other wealthy people, and the amount of money you are worth is nothing more or less than your current score in that game.
    - ryan_j_naughton 8y ago
      >There is an amount of wealth (and I think it's substantially less than a billion dollars), past which gaining more wealth won't improve your standard of living at all. That is based on a very narrow definition of standard of living. If you include the "goods" that are social status among your wealthy friends while you're on your Mega-yachts around the isle of Capri then power is itself a part of your standard of living. Standard of living should be any good or service you have access to based on your income/wealth. Those goods don't have to be material goods but can be conceptual / philosophical goods. Thus, reshaping whole industries, singlehandedly pushing the boundary on the privatization of space, etc can all be thought of as part of one's standard of living for the world's super elite.
- pfortuny 8y ago
  You have a concave utility function in mind. As history shows, it is NEVER concave.
- username223 8y ago
  The wealthy are not like you and I. Money is no longer used for buying stuff, but just for keeping score. Bezos is worth more than Zuck, so if Zuck can delay some information long enough for his scheduled stock sales to be worth a bit more, it will get him that much closer to Bezos. He probably didn't expect to be caught, and doesn't expect to be fined more than he gained. Meanwhile, FB stock has been flat for a year, and they have already reached every person in the world plus a few hundred million bots, and can't figure out another business. The multi-billion-dollar fines won't kill them, but they cut into profits enough. It's a good time to cash out.
- SmellyGeekBoy 8y ago
  I earn more than enough money for my needs. But when an opportunity comes along to make some more? Sure, why the hell not. OK, I'm not quite a billionaire (ha!) but I don't see why this mindset doesn't persist as net worth increases.
- kerng 8y ago
  Its human nature, the desire to have more and that what we have isn't enough. A motivation could be as simple as Gates and Bezos have more and rank higher - and maybe Zuckerberg doesnt like that.
- rconti 8y ago
  Same reason billionaires buy supercars and register them in Montana to save a few bucks on taxes, because it's so unfair that the government wants a large chunk of their reg fees for a car they drive so rarely, but the rest of us with far less money play by the rules.
  - geddy 8y ago
    Well, they probably didn't become billionaires by spending extra money when they didn't have to. Even Bill Gates has a budget.
dpflan 8y ago
"""A Facebook spokesperson said all of Zuckerberg’s trading in Facebook stock had been done through plans set up under Securities and Exchange Commission Rule 10b5-1. The rule allows company insiders to avoid insider trading allegations by establishing formal plans to sell a predetermined number of shares at a preset time.""" So you can follow the rules and have sales on a schedule and not be labeled "insider trading", but restrict disclosure of information that would affect the price prior to the scheduled sales. So there needs to be a mandatory disclosure deadline once something is discovered. I'm not familiar with the law here, but how is it changing? It seems hard to classify different events as worthy of mandatory public disclosure when they vary across industries.
- rando444 8y ago
  What if you sit on the information long enough that you can plan your trades ahead of time before the information becomes public? cough Intel cough
- chollida1 8y ago
  > So you can follow the rules and have sales on a schedule and not be labeled "insider trading", but restrict disclosure of information that would affect the price prior to the scheduled sales. So there needs to be a mandatory disclosure deadline once something is discovered. Partially correct. Your trades will still be tagged as a trade by an insider, I can see all Mark's trades on my bloomberg terminal. But you are correct that currently you don't need to stop your scheduled trades if good or bad news is bout to be reported and there isn't a firm rule about when you need to report bad news, ie you could delay the release of bad news until after your preplaneed sale and as long as you had a reason other than "for your own benefit" as the reason why you delayed the release of bad news you would almost certainly be in the clear. Any "pre planned" trades that were originated after the news was known to you would almost certainly get you investigated by the SEC. TL/DR there is a big distinction between "Insider Trades" and "insider trading". The former is any trade by an "insider", which is a term with meaning by the SEC and the later is illegal and what Matt Levine has made a career writing about.
- tyre 8y ago
  If events are disclosed in a timely manner then shareholders can sue for securities fraud. Matt Levine—a columnist at Bloomberg who is both smart and hilarious; his Money Stuff newsletter is excellent—has a recurring theme of “everything is securities fraud.” The theory: anything that effects the stock price of the company and isn’t disclosed as soon as possible is securities fraud. Company doesn’t disclose a security breach? Securities fraud. Board buries a sexual harassment settlement with the CEO? Securities fraud. If you buy stock after the event but before the event is disclosed, you were trading when the company had material information that could effect the stock price. That’s securities fraud. Levine is both joking and not that really _anything_ could be prosecuted under this, and the SEC has seemed to make some prosecutions under this theory that feel more like, “what you did was shitty and maybe not exactly illegal or we don’t have exact evidence so we’ll prosecute you under this super broad statute.” Wire fraud seems to be applied in a similar manner. (I’m not a lawyer and this is not legal advice, just some things I’ve read and now you’re reading on the internet from a random commentor. The above is how I understand it.)
calimac 8y ago
This has been a long time coming. Ultimately the users must have the capacity to understand how they are being harmed. Eventually bringing a class action will risk catastrophe for Facebook.

187 points by mzs 8y ago

It appears that there is probably not any insider trading going on in this case. However, does anyone else have a thought of "what motivation does a multi billionaire have to insider trade?" when reading headlines like this? It's confusing why you would try to eek out that little bit of extra value, there is no incentive.

robdachshund 8y ago
Ask intels last CEO
elliekelly 8y ago
This is a derivative suit (civil, not criminal) brought by a shareholder alleging Zuckerberg violated his fiduciary duties to shareholders in a number of ways. One of the alleged ways is insider trading. This is very different from the DOJ alleging criminal insider trading/market manipulation. While this isn't a criminal insider trading case and delayed disclosure is not the typical insider trading allegation it's also not a stretch by means. Complaint for anyone interested: https://images.law.com/contrib/content/uploads/documents/394/4694/Feuer-v.-Zuckerberg-Complaint.pdf https://images.law.com/contrib/content/uploads/documents/394...
- anticensor 8y ago
  He is the biggest shareholder and has the supermajority of voting shares, how can he violate his own benefit? He can only violate fiduiciary duties towards smaller shares.
  - elliekelly 8y ago
    You've actually just made me realize I overstated his duty to shareholders in my original comment but it's too late to edit. My apologies. A director doesn't owe a fiduciary duty (which is the highest standard of care one person can owe another) but a duty of "care and loyalty" which is a step below a fiduciary. The outcome is the same though. A director's "duty of loyalty" means that he or she cannot personally benefit at the expense of the corporation or it's shareholders. The number of shares he owns and the voting power is irrelevant as the duty applies to all shareholders.
tombert 8y ago
Presumably the same reason that multi-billion dollar corporations (and people for that matter) spend a lot of time and resources lobbying the government to pay lower taxes. Once you've hit the billion-dollar mark, you effectively have infinite money for most tangible purposes, and yet the drive to get more money continues. No idea if Zuckerberg is guilty, but I don't think "well he's already loaded" is a very good reason to assume innocence.
- JohnFen 8y ago
  > Once you've hit the billion-dollar mark, you effectively have infinite money for most tangible purposes, and yet the drive to get more money continues. There is an amount of wealth (and I think it's substantially less than a billion dollars), past which gaining more wealth won't improve your standard of living at all. However, most people who hit that continue to strive to increase their wealth. I think that this is because the sort of person you have to be in order to accumulate a large amount of wealth is the sort of person who isn't interested in the wealth in the way ordinary people are. They are interested in increasing their power, and in our society, wealth is power. I also think that past a certain point, many wealthy people are effectively engaging in a competitive game with other wealthy people, and the amount of money you are worth is nothing more or less than your current score in that game.
  - ryan_j_naughton 8y ago
    >There is an amount of wealth (and I think it's substantially less than a billion dollars), past which gaining more wealth won't improve your standard of living at all. That is based on a very narrow definition of standard of living. If you include the "goods" that are social status among your wealthy friends while you're on your Mega-yachts around the isle of Capri then power is itself a part of your standard of living. Standard of living should be any good or service you have access to based on your income/wealth. Those goods don't have to be material goods but can be conceptual / philosophical goods. Thus, reshaping whole industries, singlehandedly pushing the boundary on the privatization of space, etc can all be thought of as part of one's standard of living for the world's super elite.
pfortuny 8y ago
You have a concave utility function in mind. As history shows, it is NEVER concave.
username223 8y ago
The wealthy are not like you and I. Money is no longer used for buying stuff, but just for keeping score. Bezos is worth more than Zuck, so if Zuck can delay some information long enough for his scheduled stock sales to be worth a bit more, it will get him that much closer to Bezos. He probably didn't expect to be caught, and doesn't expect to be fined more than he gained. Meanwhile, FB stock has been flat for a year, and they have already reached every person in the world plus a few hundred million bots, and can't figure out another business. The multi-billion-dollar fines won't kill them, but they cut into profits enough. It's a good time to cash out.
SmellyGeekBoy 8y ago
I earn more than enough money for my needs. But when an opportunity comes along to make some more? Sure, why the hell not. OK, I'm not quite a billionaire (ha!) but I don't see why this mindset doesn't persist as net worth increases.
kerng 8y ago
Its human nature, the desire to have more and that what we have isn't enough. A motivation could be as simple as Gates and Bezos have more and rank higher - and maybe Zuckerberg doesnt like that.
rconti 8y ago
Same reason billionaires buy supercars and register them in Montana to save a few bucks on taxes, because it's so unfair that the government wants a large chunk of their reg fees for a car they drive so rarely, but the rest of us with far less money play by the rules.
- geddy 8y ago
  Well, they probably didn't become billionaires by spending extra money when they didn't have to. Even Bill Gates has a budget.

dpflan 8y ago

"""A Facebook spokesperson said all of Zuckerberg’s trading in Facebook stock had been done through plans set up under Securities and Exchange Commission Rule 10b5-1. The rule allows company insiders to avoid insider trading allegations by establishing formal plans to sell a predetermined number of shares at a preset time.""" So you can follow the rules and have sales on a schedule and not be labeled "insider trading", but restrict disclosure of information that would affect the price prior to the scheduled sales. So there needs to be a mandatory disclosure deadline once something is discovered. I'm not familiar with the law here, but how is it changing? It seems hard to classify different events as worthy of mandatory public disclosure when they vary across industries.

rando444 8y ago
What if you sit on the information long enough that you can plan your trades ahead of time before the information becomes public? cough Intel cough
chollida1 8y ago
> So you can follow the rules and have sales on a schedule and not be labeled "insider trading", but restrict disclosure of information that would affect the price prior to the scheduled sales. So there needs to be a mandatory disclosure deadline once something is discovered. Partially correct. Your trades will still be tagged as a trade by an insider, I can see all Mark's trades on my bloomberg terminal. But you are correct that currently you don't need to stop your scheduled trades if good or bad news is bout to be reported and there isn't a firm rule about when you need to report bad news, ie you could delay the release of bad news until after your preplaneed sale and as long as you had a reason other than "for your own benefit" as the reason why you delayed the release of bad news you would almost certainly be in the clear. Any "pre planned" trades that were originated after the news was known to you would almost certainly get you investigated by the SEC. TL/DR there is a big distinction between "Insider Trades" and "insider trading". The former is any trade by an "insider", which is a term with meaning by the SEC and the later is illegal and what Matt Levine has made a career writing about.
tyre 8y ago
If events are disclosed in a timely manner then shareholders can sue for securities fraud. Matt Levine—a columnist at Bloomberg who is both smart and hilarious; his Money Stuff newsletter is excellent—has a recurring theme of “everything is securities fraud.” The theory: anything that effects the stock price of the company and isn’t disclosed as soon as possible is securities fraud. Company doesn’t disclose a security breach? Securities fraud. Board buries a sexual harassment settlement with the CEO? Securities fraud. If you buy stock after the event but before the event is disclosed, you were trading when the company had material information that could effect the stock price. That’s securities fraud. Levine is both joking and not that really _anything_ could be prosecuted under this, and the SEC has seemed to make some prosecutions under this theory that feel more like, “what you did was shitty and maybe not exactly illegal or we don’t have exact evidence so we’ll prosecute you under this super broad statute.” Wire fraud seems to be applied in a similar manner. (I’m not a lawyer and this is not legal advice, just some things I’ve read and now you’re reading on the internet from a random commentor. The above is how I understand it.)

calimac 8y ago

This has been a long time coming. Ultimately the users must have the capacity to understand how they are being harmed. Eventually bringing a class action will risk catastrophe for Facebook.