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Report: Fraud Arrest Prompted Facebook Contract Suit

 & Chloe Albanesius Executive Editor, News

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A man claiming an 84 percent stake in Facebook told Bloomberg this week that the lawsuit probably would not have happened had he not been arrested for fraud.

Paul Ceglia, who sued Facebook last month claiming an 84 percent stake in the social-networking site, said he only unearthed the alleged contract while trying to hunt down assets to pay customers of a failed wool-pellet business.

"If this thing hadn't happened the way it happened, no way I would have ever started looking through these ancient folders," Ceglia told Bloomberg. "That contract would just be sitting in there gathering dust."

Ceglia and his wife started Allegany Pellets in February 2009, which sold environmentally friendly pellets from reclaimed wood for home heating purposes. Trouble is, the company accepted payment from customers but never delivered the goods. Ceglia was arrested in October 2009 for accepting $200,000 in pre-paid orders.

Ceglia told Bloomberg that production issues have now been resolved, and said that if the state of New York would allow him to start selling pellets again he would be able to pay customers back.

Ceglia said he met Facebook chief executive Mark Zuckerberg when he hired Zuckerberg to do coding work for a company called StreetFax. Ceglia said Zuckerberg then persuaded Ceglia to invest in Facebook - $1,000 for a 50 percent stake in the company, plus an extra 1 percent stake for every day Facebook was not online past Jan. 1, 2004.

Ceglia had high praise for Zuckerberg's coding skills and said that if he one day takes control of Facebook, he would like "hire him to keep running the company." Don't expect Ceglia to become the face of the social-networking site. "I really don't have much interest in it," he told Bloomberg.

Interestingly, Ceglia might not be the only one vying for that stake in the company.

Ceglia's work with StreetFax started when he was contracted through Massachusetts-based StreetDelivery.com. Logan Street, founder and CEO of StreetDelivery.com, said that if Ceglia signed a contract for Facebook while working for StreetFax, then Logan and StreetDelivery.com are the real owners of that 84 percent stake.

"We're going to lay claim that I own it," said Logan. "He was under contract to me."

Facebook has said it suspects the Ceglia contract was forged.

Originally posted to AppScout.

About Our Expert

Chloe Albanesius

Chloe Albanesius

Executive Editor, News

My Experience

I started out covering tech policy in DC for The National Journal, where my beat included state-level tech news and all the congressional hearings and FCC meetings I could handle. I later covered Wall Street trading tech before switching gears to consumer tech. I now lead PCMag's news coverage.

My Areas of Expertise

Getting my start in DC means I still have a soft spot for tech policy; Congressional hearings can sometimes be as entertaining as a Bravo reality show, for better or worse. But PCMag is all about the technology we use every day, as well as keeping an eye out for the trends that will shape the industry in the years ahead (or flop on arrival). I've covered the rise of social media, the iOS vs. Android wars, the cord-cutting revolution that's now left us with hefty streaming bills, and the effort to stuff artificial intelligence into every product you could imagine. This job has taken me to CES in Vegas (one too many times), IFA in Berlin, and MWC in Barcelona. I also drove a Tesla 1,000 miles out west as part of our Best Mobile Networks project. Of late, my focus is on our hard-working team of reporters at PCMag, guiding and editing their robust coverage.

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