Did Facebook and Twitter CEOs Bilk Co-Founders Out of Billions?

Both Facebook CEO Mark Zuckerberg and Twitter founding-CEO Evan Williams may have fabricated stories of how their companies were founded and, more importantly, cost legitimate co-founders and investors billions of dollars.

I guess stranger things have happened, but not many.

Now, don't think for a minute that this is a sensationalist headline. It's not. The evidence is compelling, to say the least, and the parallels between the two stories are eerie. Just to be clear, there's nothing criminal here, but civil, that's another story altogether.

After settling with the Winklevoss twins for $170 million, Facebook now faces a much bigger threat: a suit by Paul Ceglia that claims ownership of half the venture known as The Face Book that he and Zuckerberg entered into jointly in 2003.

As for Twitter, after reading the whole gory story, it's hard to imagine that the company isn't potentially exposed to some large civil lawsuits, as well. In any case, Business Insider has dished up two cautionary tales that are likely to cause more than a few startup entrepreneurs and investors to lose sleep at night.

Introducing Twitter's Unknown Co-founder, Noah Glass

In The Real History of Twitter, Nicholas Carlson weaves a shocking story of how there would be no Twitter without a co-founder that none of us has ever heard of, Noah Glass. Not only that, but Williams fired Glass and sent him packing without a single share of the company.

This incredible piece of investigative journalism based on interviews with dozens of insiders seems to uncover all sorts of sordid details about how Twitter came to be, including:

• When asked how the company was founded, Williams and co-founders Biz Stone and Jack Dorsey routinely - and as recently as two weeks ago on the Howard Stern show - tell a story that appears to be, more or less, a complete fabrication with no mention of Glass at all.
• Williams bought out the other investors in Odeo - the predecessor company where Twitter was actually devised - for a few million bucks, essentially passing Twitter off as "one of the pieces of value I see in Odeo, but it's much too early to tell what's there" and "it's hard to say it justifies the venture investment Odeo certainly holds --" That left some serious Silicon Valley investors wondering if "they were somehow conned by Williams," according to the article.
• Once Williams bought out the other investors, he shocked everyone by firing Odeo's founder and Twitter's biggest champion and advocate, Noah Glass. In fact, Glass brought Williams into Odeo in the first place and had a plan for spinning Twitter off as a standalone company. Maybe that's why Williams canned him. And while Glass initially walked away with nothing, Williams later gave him some equity. You've got to wonder if that was out of guilt.

The article leaves you wondering what the next move might be for all those high-powered Odeo investors who walked away with a tiny fraction of "what could have been." That includes Tim O'Reilly of O'Reilly Media, who said, "It's certainly possible that Ev is more Machiavellian than he appears. I don't know. It's very easy to look back and say, 'Wow, I'd like to have a bigger piece of that.'"

In addition, Business Insider has an exclusive, eye-opening interview with "Twitter's forgotten founder, Noah Glass."

Does Facebook CEO Mark Zuckerberg Owe Somebody $6 Billion?

In contrast to Twitter, Mark Zuckerberg and Facebook's problems are already winding their way through the federal court system. Having already given up a piece of the pie to the Winklevoss twins, Facebook now faces a multibillion dollar lawsuit from Paul Ceglia.

Who in the world is Paul Ceglia? He's the guy who, according to the article, claims to have an agreement from 2003 where Zuckerberg gave him 50 percent ownership of a project that ultimately became Facebook. I know, it sounds fantastic, but if the agreement and emails between Ceglia and Zuckerberg are real, the lawsuit's got some real teeth.

Despite being a convicted felon whose original claim was written off by Facebook as a complete fabrication, Ceglia and DLA Piper - a big international law firm that appears to have done considerable due diligence on the legitimacy of Ceglia's claim - have filed an amended lawsuit. And the new evidence, which includes quite a few emails between Zuckerberg and Ceglia, is, as Henry Blodget's article says, "startling" and "breathtaking."

If the evidence is real, it appears that, after signing an agreement to develop The Face Book with shared 50/50 ownership in the venture, Zuckerberg develops the site and then cuts Ceglia out of the loop. Zuckerberg emails his "partner," saying that he's thinking of shutting down the site because he's busy and there's little interest among students. All the while, Facebook is taking off.

Soon thereafter, Zuckerberg incorporates Facebook and the rest is history. According to the article, Facebook says all the emails and contract are fake. DLA Piper, on the other hand, says Ceglia is entitled to half of Zuckerberg's stake in the company which, according to my calculations, is about $6 billion.

You just can't make this stuff up. Really.

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