Does the man suing for 50 percent of Facebook actually have a case?

Paul Ceglia claims he is entitled to half the company, citing a 2003 contract he signed with Mark Zuckerberg. Legit complaint, or is this a scam?

A series of circa-2003 emails that his attorneys say are phonies allege that Facebook CEO Mark Zuckerberg backstabbed an early investor.
(Image credit: Corbis)

Facebook CEO Mark Zuckerberg has a knack for attracting high-profile litigation — just this week a U.S appeals court shot down a long-running lawsuit brought by twins Cameron and Tyler Winkelvoss, who claim that Zuckerberg stole their idea to create Facebook. But just as that conflict simmers down, a similar one is heating up. On Tuesday, businessman Paul Ceglia filed a complaint in federal court claiming he's entitled to half of Zuckerberg's estimated $13.5 billion fortune. As proof, Ceglia has produced a series of years-old email exchanges with Zuckerberg that cast the Facebook CEO as a backstabbing business partner. Though Ceglia has some skeletons in his closet, the fact that he's retained the well-respected law firm DLA Piper suggests he might just have a case. A brief guide:

What is Ceglia's complaint?

Ceglia claims that in the fall of 2003, he lent Zuckerberg $1,000 to help start Facebook, while simultaneously enlisting the Harvard freshman to work on another web project. He and Zuckerberg signed a contract that entitled Ceglia to a 50 percent stake in any revenue Facebook might generate. Ceglia says he has a copy of that all-important document, but has not yet revealed it in court.

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What do the emails say?

More than a dozen pieces of correspondence, purported to be from 2003 and 2004, show Zuckerberg and Ceglia's uneasy partnership unraveling. Ceglia soon becomes angry that Zuckerberg has squandered his initial investment: "I’m starting to think you just blew that money, Mark." Both parties later allegedly agree to split the company 50/50. After sparring over the idea of selling ads on the growing site, Zuckerberg apologizes ("I see that what I did was wrong"), offers to give Ceglia his initial investment back, and claims that he no longer has time to work on Facebook — this, just before he received millions of dollars in capital that would help make the site a worldwide phenomenon.

Why is Ceglia only filing the suit now?

It's unclear. When he filed his first complaint last summer, Ceglia said that he simply forgot about his stake in Facebook, and only discovered the 2003 contract while going through files. That argument is "not particularly persuasive in light of the huge publicity Facebook and Mark Zuckerberg eventually received," says Henry Blodget at Business Insider, and Ceglia will likely have to explain himself.

What does Facebook say?

That Ceglia is a fraudster. "The alleged emails are phony, just like the alleged contract is phony," says Orin Snyder, an attorney representing Zuckerberg, as quoted by The Wall Street Journal. Ceglia is nothing but a "scam artist," and Facebook "wasn't even a figment of Mark's imagination" when the emails were supposed to have been sent.

So does Ceglia have a case?

"It will be a tough fight, that's for sure," says Ryan Tate at Gawker. The biggest obstacle is probably Ceglia's past: He was once convicted of a drug felony, and in 2009, was arrested for allegedly defrauding customers of a wood pellet company he runs in upstate New York. On the other hand, DLA Piper "probably wouldn't have taken the case if it thought Ceglia didn't have a reasonable claim." One thing's for sure, says Blodget: The stakes are very high. "If the emails are fake, Paul Ceglia will be going to jail for a long, long time — a consequence that we assume was not lost on him."

Sources: Wall Street Journal (2), Business Insider, Gawker, GNT, Bloomberg

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