Facebook Inc (FB) Stock Scammer Allegedly Bilks Millions From Victims

Facebook’s initial public offering was marked not only with a hug snafu caused by trading glitches at the NASDAQ but also lawsuits about the alleged misstatement of ad revenue and even a major con that involved selling fake Facebook shares.

Facebook Inc (FB) Stock Scammer Allegedly Bilks Millions From Victims

Making connections

Bloomberg reports that a man calling himself Ken Dennis stole millions of dollars by using one of his Silicon Valley connections. The man’s real name is Troy Stratos, and he faces fraud charges in a case that’s just too strange to make up. The story involves billionaire Carlos Slim, a Facebook insider Eddie Murphy’s ex-wide.

It started in December 2010 when Silicon Valley money manager Divesh Makan emailed then-Facebook Chief Financial Officer David Ebersman to introduce him to Stratos. He reportedly said Stratos managed money for Slim and his family and “related parties.” From there, Stratos moved toward trying to sell fake shares of Facebook before the company’s IPO.

Stratos indicted on fraud charges

At the time Stratos allegedly tried to sell the fake Facebook stock, the Dept. of Justice was about to indict him on charges of stealing $7 million from comedian Eddie Murphy’s ex-wife, Nicole Murphy. Stratos is currently on trial on charges of selling fake Facebook shares. He will face a second trial related to the charges for stealing from Ms. Murphy in October.

He’s been in a Sacramento County jail on the charges relating to the alleged crime against Ms. Murphy since the FBI discovered him hiding in a close in a Los Angeles luxury apartment in 2011. In May 2013, the Dept. of Justice added on the charges of selling fake Facebook shares.

Stratos: I never delivered the Facebook (FB) shares

Stratos has pled not guilty to all of the charges. He testified in January 2012 that he never delivered the fake Facebook shares (and how could he really since they were fake?). He also said he had connected money manager Tim Burns with an executive at Facebook and other investors who said they had some shares to sell. He called the money he collected a fee and said he spent it paying off some of his debts, attempting to set up a restaurant in Las Vegas and buying three vehicles, namely, a Chevy Camaro, a Range Rover and an Audi convertible that was priced at $200,000.

He has quite a track record, according to Bloomberg. Stratos allegedly conned people all over the world by signing investors on for movies that were never filmed and real estate projects that never got built. In his dealings with Nicole Murphy, he offered to manage her money after her divorce, advising her to move her money to Dubai where the interest rates are higher. However, prosecutors allege he spent the money.

How the alleged fake Facebook (FB) scam worked

Court documents indicate that Burns and Stratos, under his alias as Ken Dennis,” spoke for the first time in March 2011 after being introduced by a broker. Stratos reportedly told Burns he was managing money for the Slim family, although a spokesperson for the Slim family said they have never had any contact with him or a man named Ken Dennis.

Stratos also told Burns that he knew some Facebook executives who wanted to sell some of their shares for $27 each. Stratos then connected with Ebersman through Makan, as described above, suggesting to Ebersman that Facebook may want to rent some office space he had. Burns ended up wiring $2.8 million to prepare for the purchase of the Facebook shares. Prosecutors allege Stratos took the money for himself and continued to string Burns along, extracting an additional $1.25 million from him. The alleged con reportedly fell apart when Stratos was arrested for allegedly defrauding Nicole Murphy.