Law Firm Accuses Zynga Execs of Insider Trading

Sarah LeBoeuf

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Apr 28, 2011
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Law Firm Accuses Zynga Execs of Insider Trading



Zynga employees were stuck with plummeting shares as their bosses cashed out and made millions.

Things really haven't been going Zynga's way this month. The Farmville maker saw its made a killing [http://www.escapistmagazine.com/news/view/118723-Zynga-Share-Price-Crashes] by selling their shares before the crash. That raised a few eyebrows, causing several law firms to investigate. Now one of them, Newman Ferrara, has filed a suit alleging that Zynga's top employees engaged in insider trading.

Filed yesterday in San Francisco, the lawsuit states that top execs got underwriters Morgan Stanley and Goldman Sachs to waive the restriction period for selling their shares imposed on other employees. According to Ferrara attorney Roy Shimon, "Zynga's regular employees were still locked up from selling their shares. But the guys at the top, who saw what was coming down the pipe, got to cash out." Assuming the case proceeds, lawyers will need to determine how much Zynga execs knew about the stock implosion beforehand, because failing to share that information can result in insider trading.

CEO Mark Pincus wouldn't answer questions about why he sold 16.5 million shares, from which he walked away with $200 million. His employees, however, were stuck with their shares until the lock-up ended on May 28, at which point the share price had dropped more than 50% to $6. Watching their bosses cash out while stock prices dropped was hard, according to an anonymous Zynga employee. "It's not easy for folks to see that the executive team were selling their shares while most people were still locked up."

Since Newman Ferrara is one of five law firms that have announced their plans to investigate Zynga, the social game maker's legal troubles are only just beginning. If more firms move forward with suits, they will be competing for Zynga investors to be their clients, with the eventual lead plaintiff being the one who represents the biggest shareholders.

Source: Kotaku [http://www.theverge.com/2012/7/31/3201728/zyngas-insider-trading-lawsuits-focuses-on-execs-who-avoided-ban-on]

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Weaver

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Apr 28, 2008
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You mean Mark Pincus might be a sleazebag who screws people over for his own personal gain?
My word!

I seriously hope he goes to jail.
 

Fappy

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Jan 4, 2010
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This was honestly the first thing I thought when I heard the news the other day.
 

cynicalsaint1

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Apr 1, 2010
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Ah yes, making millions while the people who actually make your company run get screwed.
They simply cannot lock these douchebags up fast enough.
 

Azuaron

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Mar 17, 2010
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cynicalsaint1 said:
They simply cannot lock these douchebags up fast enough.
Well, I mean, they could. Like, if they did it at the speed of light [http://what-if.xkcd.com/1/].
 

Eric the Orange

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Apr 29, 2008
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I'd like to say they're found guilty and pay for there crime. But I don't have that much faith in the legal system. they have lots of money, they'll bribe there way out of this.
 

Azuaron

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Eric the Orange said:
I'd like to say they're found guilty and pay for there crime. But I don't have that much faith in the legal system. they have lots of money, they'll bribe there way out of this.
Yep. anything [http://en.wikipedia.org/wiki/ImClone_stock_trading_case].
 

McMullen

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May they be sued so hard they drop below the poverty line and never rise above it again.
 

Zaik

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Jul 20, 2009
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Always good to see Goldman Sachs in another news story involving blatantly illegal money related nonsense.

I swear, they are some kind of comic book villain corporation.
 

marurder

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Jul 26, 2009
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Fappy said:
This was honestly the first thing I thought when I heard the news the other day.
Me too, what a surprise?
They won't be punished though, ot enough evidence or it will drag on for so long that nothing eventuates...
 

weirdee

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Apr 11, 2011
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"And to the court, I present to you, Exhibit A: Zynga's publicly known business plan, titled We Will Rip Anybody Off For Money, or better known to the employees (who were also being ripped off) as aDUHHHHHHH"

buying their stock is pretty much like purchasing tickets to an event that happened a few months ago, at a location that only exists in the mind of my imaginary friend, Steve
 

Sylocat

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What is their defense going to be, exactly? "Oh, we just happened to all dump our stock right before a crash?"
 

fenrizz

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Sylocat said:
What is their defense going to be, exactly? "Oh, we just happened to all dump our stock right before a crash?"
Well... If I had Zynga shares I would have dumped those shares as soon as I possibly could.

It's not all that unthinkable that they too suspected that the company was severely overvalued
 

Bvenged

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Sep 4, 2009
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IF this holds water, I want every cent that can be taken off of those execs, shared between the employees. What those execs did was greed and nothing more. There's a difference between being business smart and just plain selfishly evil.