First Lawsuit Filed Over Zynga Insider Trading Claims
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First Lawsuit Filed Over Zynga Insider Trading Claims

This is a pretty serious story, so in order to relieve some tension, here's CEO Mark Pincus playing poker with a dog on top of a pile of presumably your money.

Casual games publisher Zynga has come under fire recently over accusations that top members of the company's executive team dumped company stock ahead of a massive drop last week. Five different law firms have been investigating Zynga and its corporate heads over possibilities that top brass may have violated federal insider trading laws, and now the first suit on the subject has been officially filed.

According to the suit (first acquired by The Verge), law firm Newman Ferrara is claiming that members of Zynga's executive team, including CEO Mark Pincus, had the company's underwriters--Goldman Sachs and Morgan Stanley--waive a restriction that would have prevented them from selling their stock shares prior to May 28 of this year. By waiving the restriction, Pincus and company were able to cash out over $500 million in stock while the price was at $12 a share this April. At the time of the lockup's expiration for other employees, the stock had dropped to roughly $6 a share. As of today, it's closer to $3.

"Zynga's regular employees were still locked up from selling their shares. But the guys at the top, who saw what was coming down the pipe, got to cash out," Ferrara attorney Roy Shimon explained to The Verge.

Pincus had apparently dodged a question regarding the unloading of his stock during last week's company earnings call, telling BTIG analyst Richard Greenfield, "We believe in the opportunity for social gaming and play to be a mass-market activity, as it is already becoming," instead of responding to his question.

As The Verge points out (by way of the New York Times), Pincus himself only cashed out a fraction of his total stock earnings, meaning he took a significant financial hit along with other shareholders. However COO John Schappert sold roughly 45% of his total stock, while CFO David Wehner unloaded more than half his shares.

I'll just go ahead and attempt to preempt the whole slew of inevitable "Zynga is evil" comments by asking a question. Um. Uh...so...are any of you still playing Words With Friends? Nobody accepts my invites anymore...

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giantbomb

Contributor: giantbomb   Posted: Jul 31, 2012 at 2:22pm
Gaming Category: Gaming News
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