A corporate development team member was caught after purchasing shares from the secondary market.
According to a report from New York Times, Facebook fired a senior employee after he was caught purchasing Facebook shares through secondary markets in violation of the company’s policy on insider trading.
The employee, Michael Brown, who worked in corporate development, issued a statement through his lawyer Edward Swanson, admitting to his actions, however saying that he did it under best interest of the company.
“I did buy Facebook stock on the secondary market in early September 2010, and I did so with the absolute best of intentions and only because I believe in Facebook.”
TechCrunch was first on the story and had initially claimed that Brown had purchased the shares ahead of Goldman Sachs’ $1.6 billion investment in the company.
Referring to the story, Brown said: ““False and damaging information has been published about my actions.” He added that he had no knowledge of the Goldman Sachs deal “until it appeared in the press in January 2011.”
Later on, TechCrunch amended its story and said that Brown may have purchased the shares in September.
Stephen Diamond, a teacher of securities law at Santa Clara University explained what this could mean for Brown and its affect on private companies like Facebook.
“If the employee had material information which he did not share with the seller, he could be charged with violating the law,” Professor Diamond said. He believes the episode could bring further scrutiny from S.E.C to exchanges like SecondMarket and SharesPost. “This could be evidence that the control procedures in these markets are not sufficient,” he added.
Brown ended his statement by saying: ““I am saddened by the course of events that led to my departure and the incorrect reporting of it. I am now focused on moving on past this unfortunate series of events.”