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New York businessman faces fraud charges for attempting to sue Facebook



(Reuters) - A New York businessman must face criminal fraud charges for trying to claim a billion-dollar stake in social media company Facebook Inc, a federal judge ruled on Friday.

Paul Ceglia, 40, is accused of forging a 2003 contract with Facebook CEO Mark Zuckerberg that supposedly entitled him to part ownership of the company.

After an hour-long hearing in New York, U.S. District Judge Andrew Carter rejected Ceglia's request to throw out the charges, finding he had failed to meet the "high standard" needed to dismiss a grand jury indictment.

Ceglia sued Zuckerberg and Facebook in 2010 in a federal court in Buffalo, New York, claiming that he and Zuckerberg had signed a contract while Zuckerberg was a freshman at Harvard University for Ceglia to invest $1,000 in a planned social networking website.

Zuckerberg had previously done some programming work for Ceglia's company, StreetFax.com. Facebook has argued that the only contract between the two men was related to that company and accused Ceglia of faking various documents as part of his lawsuit.

Last year, a magistrate judge in Buffalo recommended that Ceglia's lawsuit be dismissed, finding that it was "highly probable and reasonably certain" that the contract was fabricated in order to pursue the lawsuit. The federal judge overseeing the case has not yet ruled on that recommendation.

Prosecutors in New York charged Ceglia in 2012, accusing him of forging documents as part of the Buffalo litigation.

Ceglia has since filed a separate lawsuit against Manhattan U.S. Attorney Preet Bharara, whose office is prosecuting Ceglia, and U.S. Attorney General Eric Holder seeking to halt the criminal case.

On Friday, Ceglia's defense attorney, David Patton, argued that the government should be barred from prosecuting him for allegations he made in the context of a civil lawsuit, warning that it could discourage litigants from filing claims.

He also said the government's allegations do not constitute criminal fraud under federal law.

"They're alleging that it's simply a phony, sham litigation," he said. "That's not fraud."

Carter said the indictment was sufficient to move ahead, though he said he would consider Patton's arguments at a later date if the case goes to trial.

Following the hearing, Ceglia vowed to press forward with his claims against Facebook, while his civil attorney, Joseph Alioto, said they would prove the Zuckerberg contract is legitimate.

"Nothing is going to stop me," Ceglia said.

Ceglia's lawsuit created a bizarre backdrop as Facebook marched toward its initial public offering in May 2013. Facebook's origins were also the subject of a separate legal challenge by Zuckerberg's Harvard classmates, twins Cameron and Tyler Winklevoss, that was chronicled in the 2010 film, "The Social Network."

The criminal case is U.S. v. Ceglia, U.S. District Court, Southern District of New York, No 12-cr-00876. The lawsuit against Bharara and Holder is Ceglia v. Holder et al in the same court, No. 13-00256. The civil case is Ceglia v. Zuckerberg et al, U.S. District Court, Western District of New York, No. 10-00569.

(Reporting by Joseph Ax; editing by Andrew Hay)

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Jack Adler March 08 2014 at 12:05 PM

What Ceglia's law suit proves is that..success has many parents and that failure is an orphan.

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max13722 March 08 2014 at 5:11 PM

So he's not facing criminal charges because he tried to sue Facebook, he's facing criminal charges because they allege that he forged documents. Nice reporting.

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propickup March 08 2014 at 5:07 PM

It's all about money and always will be.

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1 reply
abcstarfox propickup March 08 2014 at 9:50 PM

I so afgree with you,.
Tried to vote yes, but....it would not let me vote.

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Practical Nomad March 08 2014 at 5:03 PM

Seems rather simple to prove. One would assume it went through Attorneys, typically requiring a notarized signature. If not and fraud, time to pull in handwriting analysts.

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1 reply
Cheryl Practical Nomad March 08 2014 at 5:14 PM

I sign my name different every time, tired, rushing, don't care. While some points of a letter can be recognized it seems the signatures would really have to be off if that is the case why bring in an expert. I guess to spend more money.

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1 reply
Steve Cheryl March 08 2014 at 7:37 PM

"I sign my name different every time, tired, rushing, don't care."

In your life, it probably doesn't matter until you get hit with identity theft. For managers, financiers, lawyers, accountants, etc. - not a good idea.

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wlh1923 March 08 2014 at 4:31 PM

Zuckerberg endeavors to remove all the suckers, leeches and remoras that have attached themselves to him by virtue of their acquaintence.

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smo7707191 March 08 2014 at 3:11 PM

He is definitely a leech .Trying to make money out of someone else,s success .There are millions of them out there believe ,eg There are a lot of Bernies out there ...... Madeoff
You have to be careful .

Flag Reply +5 rate up
smo7707191 March 08 2014 at 3:08 PM

They usually do get caught .The guy has guilt written all over his face .
Trying to make a few bucks for him self .idiot I would say ..

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frozenbull March 08 2014 at 3:07 PM

It's called getting on the gravey train

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thisistheendof March 08 2014 at 3:07 PM

HERE COMES ANOTHER BORING MOVIE.......

Flag Reply +3 rate up
chefdorsback March 08 2014 at 1:56 PM

Wait a miinute...........Phony isn't fraud?? And a BJ isn't sex right? LMAO!!!!

Flag Reply +3 rate up
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