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Man who claimed Facebook ownership charged with fraud

Remember the man who claimed to own 84 per cent of Facebook? Turns out he might not be the most credible individual.

The Manhattan US attorney's office has charged Paul Ceglia with concocting a multi-billion dollar scheme to defraud Facebook and its CEO, Mark Zuckerberg.

According to officials, Ceglia "doctored, fabricated, and destroyed evidence to support his false claim." He was arrested at his home in Wellsville, New York on Friday morning and will appear in federal court in Buffalo to face charges of mail and wire fraud. Each count carries a maximum sentence of 20 years in prison.

The case dates back to July 2010 when Ceglia sued Facebook and argued that he owned 84 per cent of the social network. In 2003, Ceglia hired Zuckerberg to do coding work for a company called StreetFax. Ceglia said Zuckerberg then persuaded Ceglia to invest in Facebook—$1,000 (£623) for a 50 per cent stake in the company, plus an extra 1 per cent stake for every day Facebook was not online past 1 January, 2004. Ceglia, therefore, claimed to have an 84 per cent stake in the social-networking site.

The suit, however, begged the question: if you owned a big chunk of a billion-dollar company, why wait so long to say something? Ceglia told Bloomberg that he "forgot" and only unearthed the Zuckerberg contract while trying to hunt down assets to pay customers of a failed wool-pellet business. Facebook quickly asserted that the document, as well as emails produced by Ceglia, were fake.

Manhattan US Attorney Preet Bharara agreed. Ceglia's claim about owning 50 per cent of Facebook "was entirely false," Bharara's office said.

"Ceglia simply replaced page one of the real contract with a new page one doctored to make it appear as though Zuckerberg had agreed to provide Ceglia with an interest in Facebook," Bharara said. "And Ceglia doctored, fabricated and destroyed evidence to support his false claim."

Law enforcement searched Ceglia's hard drive and found the original 2003 contract, and the real contract does not even mention Facebook, let alone provide Ceglia with 50 per cent ownership. Moreover, Ceglia didn't exactly pay attention to detail; the spacing, columns, and margins on the second page of the alleged contract differ from the first. Ceglia tried to delete the original contract and replace it with the fake, but a forensic expert uncovered the scheme when examining his hard drives and other electronic media.

Meanwhile, emails released by Ceglia in April 2011 that he claimed to have written to Zuckerberg do not exist. Officials searched Zuckerberg's Harvard email account and the university's backup tapes and did not find any messages that discussed Facebook.

"We commend the United States Attorney for charging Ceglia with federal crimes in connection with his fraudulent lawsuit against Facebook. Ceglia used the federal court system to perpetuate his fraud and will now be held accountable for his criminal scheme," Orin Snyder, a partner with Gibson Dunn and an attorney for Facebook and Zuckerberg, said in a statement.