Earlier this month, TechCrunch reported that Facebook fired a corporate development manager named Michael Brown because he bought Facebook shares on a secondary market, violating the company’s insider trading rules.
TechCrunch also initially reported that Brown may have bought the Facebook shares in September, knowing that Goldman Sach’s planned to invest in Facebook at a $50 billion valuation in January.
Basially, Brown spent $100,000 of his own money to double-down on his employer, and it completely back-fired.
BusinessWeek: Brown was an enthusiastic manager in the social network’s corporate development group who worked on “talent acquisitions,” the purchases of tiny startups for the purpose of recruiting their top execs and engineers.
During the summer of 2010, Brown placed a bid to purchase additional shares of Facebook on SecondMarket, according to a person familiar with the matter who did not want to be identified because it is considered an internal company issue. This person, who has spoken with Brown about the situation, said Brown had no insider knowledge about the company’s finances and merely wanted to increase his stake in the company’s success. The transaction, for $100,000 of additional Facebook stock, closed in September, and for the next five months nothing happened. In February an outside securities lawyer, working for Facebook on its compliance with the SEC’s investigation into secondary markets, called Brown into a conference room, confronted him about the purchase, and suspended him.
A Facebook spokesman later said Brown violated the company’s prohibition on buying and selling company stock, part of an internal policy announced to employees in April 2010. Brown, this person says, was dumbstruck: He claimed he was unfamiliar with the policy. A few weeks later, he was again summoned to Facebook’s offices and fired. His attorney, Edward Swanson, declined to comment.
The episode proved mortifying for Facebook and for Brown: The technology blog TechCrunch later incorrectly reported that Brown had obtained advance information about the January 2011 investment in Facebook by Goldman Sachs and was fired for insider trading.
UPDATE: SecondMarket tells us BusinessWeek has it wrong, and that Brown did not buy his Facebook shares through them. “We do not facilitate trades with current Facebook employees,” says a spokesperson.
Either way, Sounds like Brown got a pretty raw deal – from just about everybody.
Business Insider Emails & Alerts
Site highlights each day to your inbox.