SecondMarket has received a SEC inquiry

by Fred Abramson on January 3, 2011 · 0 comments

The SEC is looking into secondary stock trades of private companies.  According to Fortune, SecondMarket now has received a formal inquiry from the SEC.

What follows is an official statement from SecondMarket spokesman Mark Murphy:

“We have now received a voluntary request for information from the SEC regarding ‘Pre-IPO Pooled Investment Funds.’ We are fully cooperating with the SEC in this inquiry. SecondMarket is a registered broker-dealer, fully regulated by FINRA and the SEC. We do not intend to comment further on this matter.”

It appears that the SEC is only looking into pooled investment funds, often setup to circumvent the 500 investor requirement where a company must go public.  Facebook announced today that they have received one such investment from Goldman Sachs.

The Law Office of Frederic R. Abramson represents business in New York. I can be reached at 212-233-0666

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When will the SEC look into Facebook-Goldman?

by Fred Abramson on January 3, 2011 · 0 comments

Image representing Goldman Sachs as depicted i...
Image via CrunchBase

Commuting to work today, after refreshing my NY Times Droid app for the first time in a week, the #2 article of the day was that Goldman Sachs, recipient of TARP money and a Russian investor, invested $500 million in Facebook.

It is well known that Mark Zuckerberg, values his autonomy and will do anything within his power to put off the day of reckoning when he will have to run a public company.

However, this move has chutzpah written all over it. You see, the SEC has certain requirements regarding the number of investors a company may have before it goes public. That number is 500, and Facebook will do whatever it takes before it will reach that number.

Goldman will create a fund where it is the sole investor of Facebook shares. Even though potentially thousands of people will invest in this new fund, Facebook will be able to circumvent the 500 investor number by pooling assets. The wealthy who invest with Goldman will come out as potential bandits, while the general public will be locked out.

With the emergence of private exchanges such as Secondmarket, shares of private companies can be bought and sold without the regulation of the SEC. Wait until one of these unregulated companies goes belly up.  You will see our tax dollars bailing them out.  Goldman can’t loose here.  I don’t know about you, but I’m going to call my broker and find out how I can get in on a piece of the action.

What do you think of these unregulated private exchanges? Should they be banned or is it a fair way for employees to cash out on difficult to sell shares?

For more reading:

The New Yorker:  Facebook-Goldman: Where is the SEC?

Wall Street Journal: Facebook IPO: Could Zuckerberg Be a Permanent Holdout?

New York Times: Goldman Invests in Facebook at $50 Billion Valuation

The Law Office of Frederic R. Abramson represents businesses in New York.  If you have questions about business law, call our office at 212-233-0666.

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Updated Facebook Subpoena Information

by Fred Abramson on October 21, 2010 · 1 comment

Facebook just posted new rules regarding obtaining subpoena info. They now codified their rule that you must obtain a subpoena in the State of California.

Here is the info:

If you are or represent a party to a civil case and believe basic subscriber information is indispensable and is not within the possession of a party, you must personally serve a valid California or Federal subpoena on Facebook. Out-of-state civil subpoenas must be domesticated in California. Facebook’s registered agent for service of process is:

Custodian of Records, Facebook, Inc.
c/o Corporation Services Company
2730 Gateway Oaks Drive
Sacramento CA 95833

Facebook is unable to process subpoenas that fail to identify users by their Facebook user ID (“UID”) or email associated with the account. Names, birthdays and purported locations are insufficient. UIDs can be found in the uniform resource locator available in a browser displaying the account in question. For example, in the URL http://www.facebook.com/profile.php?id=12345678910, 12345678910 is the UID.

Facebook charges a mandatory, non-refundable processing fee of $500.00 per user account. Please enclose payment with your properly served subpoenas. A custodian declaration will be included with the return of materials, if any. Notarized declarations carry an additional $100.00 fee.

For more info: http://www.facebook.com/help/?faq=17159

The Law Office of Frederic R. Abramson practices law in New York State.

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Mark Zuckerberg at South by Southwest in 2008.

Image via Wikipedia

Mark Zuckerberg, CEO of Facebook, has taken a lot of heat recently for changing Facebook’s privacy settings. Today, he was grilled at the D8 conference held outside Los Angeles by Wall Street Journal tech writer Walt Mossberg and Kara Swisher.

As an attorney I would be very happy to have Mark as a client.  Not only because Facebook would be a billing bonanza, but he would make a great deposition witness. He is extremely careful with his answers and has a great ability to dance around questions.

One of the big issues of the day is why Facebook recently changed its privacy settings so that information posted on the service is public unless you decide otherwise.  If you were expecting a straight answer from the CEO of Facebook as to why, you were sh_t out of luck. As Mashable notes, there was no straight answer from Zuckerberg about why Facebook Instant Personalization was opt-out instead of opt-in.

On the other hand, if you are interested in obtaining information regarding your user information from Facebook, good luck.  They claim that user information is private.  Here is an email I received from Facebook when I sent a fax requesting the user information of my client whose  account was hacked:

Thank you for your email. We will investigate this report and take the appropriate
action based on our Statement of Rights and Responsibilities. However, for privacy
and security reasons, we cannot provide any additional information about the account
at this time. Please have the account owner view the Privacy and Security pages of
Facebook's Help Center:

- Information on Hacked Accounts: http://www.facebook.com/help.php?page=420

From here, they can take the appropriate steps to receive additional support. Please
also let the account owner know that they will need to contact us from either the
login email address associated with their account or a secondary email address they

We apologize for any inconvenience this security policy may cause.

Thanks for contacting Facebook,

User Operations
Watch the video of Mark Zuckerberg speaking about privacy:

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Image representing Facebook as depicted in Cru...
Image via CrunchBase

What privacy rights do you have on social networks? Nearly everyday, civil litigators like myself and law enforcement officials request information from Facebook regarding user information.  Understandably, Facebook has been very difficult in responding to such requests, believing that users have a right to privacy concerning its users information. But how much right should users of social networks have over information that is of public record?

Many social networking sites have taken the position that they will not respond to requests for information without a subpoena.  This is a problem because users cannot obtain access to their accounts even if their account has been hacked.

This is especially problematic when it comes to the problem of cyber bullying. I have been trying to obtain records from Facebook for a client whose child whose account has been hacked by a cyber bully.  Facebook has been unwilling to provide information to me about my clients own account.

According to Law.com, the Deputy General Counsel of Facebook, Mark Howitson told lawyers at the Legal Tech Conference in New York today that they are ready to fight requests for user  information without a subpoena.

Unfortunately, you can only serve that subpoena in California which is problematic if you live in New York. Even with a subpoena, they will only provide basic subscriber information unless that user gives his or her consent.  The company believes that it does not have to provide user information under the Electronic Communications Privacy Act which was passed before Mark Zuckerberg, the founder of Facebook, danced to his first disco tune at his bar mitzvah. Since this issue is relatively new, a congressional hearing is forthcoming.

Mr. Howiston suggests that the best way to obtain information from Facebook is to make a simple friend request, which is of little utility.

What do you think?  What right of privacy should you have on social networks?  Should there be a cyber bullying exception?

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