In the months before Facebook became a public company in May 2012, shares in the social media network were the most sought-after investment opportunity in the company. Some people were so desperate to get them, they wired millions of dollars to a New Jersey lawyer who claimed to have the inside track on large blocks of shares.
The investment failed to pan out, however, since the lawyer, 61-year-old Fred Todd, was a Ponzi schemer who did not have access to any of the shares. Now, Todd will get to explore a new social network of his own — in federal prison, where he was sentenced to spend 46 months.
On Wednesday, the U.S. Attorney for New Jersey Paul Fischman announced the prison term, and a requirement for Todd to pay $6.53 million in restitution to his victims. A press release set out some of the details of the scheme:
In February 2012, Todd and his conspirators offered a pair of investors (referred to in the information as the “Facebook victims”) the opportunity to purchase large blocks of Facebook shares prior to the company’s initial public offering, or IPO, in May 2012. The offer was particularly attractive because large blocks of the shares were extremely difficult to get and were expected to increase in value at the time of the IPO. Weinstein and his conspirators did not actually have access to the shares.
Based on misrepresentations by the conspirators, the Facebook victims wired millions of dollars between February and March of 2012 to an account Weinstein and a conspirator controlled. Weinstein and another conspirator provided investors with false documents showing companies owned by various conspirators held assets, which would secure the Facebook victims’ investment.