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What I, Eduardo Saverin, Learned From Watching “The Social Network”
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Peter Thiel Rips Early Facebook Employee Eduardo Saverin And The Social Network Movie
Despite what the Social Network would have you believe, early Facebook employee Eduardo Saverin was not integral to the company, says Peter Thiel, Facebook's first big investor.
Thiel goes on the record with the Big Think to says Saverin was only "quasi-employed" by Facebook in 2004, and "he was not remotely doing" his job of selling ads.
As for the settlement Saverin received? In the movie, you think he's getting a pittance and getting totally screwed. Says Thiel, "he did extraordinarily well relative to what he had done" for Facebook. Saverin's stake in Facebook is currently worth $1.1 billion.
Pretty harsh words, and possibly the first time we've heard public statements like this on Saverin.
We emailed Thiel to get further reaction. He added to us, "I have no strong opinion on the work Saverin did, though I do think that, on a relative basis, the movie was too favorable to him and too unfavorable to Zuckerberg."
Don't miss: The Facebook Movie Is An Act Of Cold-Blooded Revenge – New, Unpublished IMs Tell The Real Story »
Video/transcription via TechCrunch/Big Think:
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Eduardo Saverin's Stake In Facebook Is Now Worth $2.5 Billion
Eduardo Saverin comes off as something of a victim in the movie about Facebook, The Social Network.
In real life Eduardo did his inept best to scuttle Mark Zuckerberg, Dustin Moskovitz, and Adam D'Angelo's work.
Anyway, thanks to a $2 billion investment from Goldman Sachs, DST, and Goldman Sachs clients, this guy now owns a stake in the company worth a whopping $2.5 billion.
Hard to feel bad for him, right?
Meet the other Facebook billionaires here >>
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Sean Parker On The Social Network
Founding Facebook President (and Napster co-founder, and venture capitalist and unwilling movie character) Sean Parker is at DLD, and had a great two-man panel with Brazilian Author Paolo Coelho. (Via TheNextWeb)
The first question Coelho asked: "Are you happy with the movie?", to audience hilarity.
Parker's response: it's "a complete work of fiction."
Parker talks of "the character played by Justin Timberlake who happens to have my name" and says the thing he liked least wasn't the drug use or other shenanigans but the fact that his character was pretty much a jerk or, as he put it, "a morally reprehensible human being."
He also adds, referring to the Victoria's Secret models Timberlake has on his arms in the movie, "I wish my life was this cool. ... There are no Victoria's Secret models in Silicon Valley."
Interestingly, he says he still considers Eduardo Saverin a friend, and says he's one of the only people affiliated with Facebook who keeps in touch with him.
The entire panel was interesting. Coelho said his last book was his best-selling in years, which he promoted only on Facebook and Twitter, and said he loved reading devices like the Kindle. He compared paper books to papyrus. "I won't read a book on papyrus", he said.
To which Parker gave a great response: "I wish we would romanticize the present" instead of the past. The present is plenty cool, and we should romanticize that instead of the past. Amen.
Speaking about internet meanness, Parker also proposed that all Twitter users agree to not say anything mean for a week. If only.
Here's the whole panel, which is great: (the Social Network stuff starts around 4:30)
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SCUTTLEBUTT: Facebook Co-Founder Eduardo Saverin Dumps $500 Million Of Facebook Stock*
We just heard the darndest thing:
We heard that Eduardo Saverin just sold $500 million of his Facebook stock on a private market.
We haven't been able to to confirm this, but we found the story and source credible enough to bring it to your attention.
(*UPDATE: We just got a nice note from a Sabrina Strauss at a firm called Goodman Media International saying that she represents Eduardo and that he "did not sell $500 million of his stock." We asked for details: Did Eduardo sell any of his stock? When? How much? We'll let you know if we hear anything.)
Eduardo Saverin, you will recall, is the Facebook co-founder who was later tossed out of the company by Mark Zuckerberg and then shared his story (and grievances) with the author of the book that later became the hit movie "The Social Network."
If the stock-sale scuttlebutt is true, well done, Eduardo!
As we've often pointed out, all the folks who have said they've gotten screwed by Mark Zuckerberg over the years have ended up getting rich as a result (Eduardo, the Winklevoss brothers, etc.). So if Mark's looking for someone new to allegedly screw, we hereby volunteer.
By the way, Eduardo Saverin has done so well on his Facebook stock that $500 million is only a fraction of his holdings, which are now worth north of $2 billion. And, more recently, Eduardo has been investing in other hot startups, like Qwiki.
Also by the way, Eduardo is hardly the only billionaire Facebook has created. Here are some others >
And here's the real Eduardo, a long, long time ago:
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Is The Unfortunate Lesson Of Twitter's Forgotten Founder That You Should ALWAYS Sue?
The most striking thing about the real story of Twitter's founding is the contrast with Facebook's founding.
It seems that Noah Glass is Twitter's forgotten founder, having come up with the name, played a large hand in building the product within Odeo, and perhaps most importantly championed it hardest when it wasn't obvious that Twitter would be big.
Glass was then pushed out and written out of Twitter's history. And Glass simply just faded away and left. He was eventually granted a small slice of equity in Twitter.
Contrast this with Facebook's founding: Glass has a much, much bigger "moral" claim to being a founder of Twitter than the people who have been claiming a piece of the Facebook pie. Eduardo Saverin provided money in Facebook's early days but then stopped working on it and even tried to hijack it by adding ads for a competing startup. The Winklevoss twins just happened to have a sorta-similar idea around the same time. And yet, because they sued Facebook and because the US legal system's process of endless appeal incentivizes settling lawsuits quickly, they had a huge windfall.
In the startup world, people who sue founders who have actually been working at the company and building product are reviled, and largely for right reasons: ideas are dime a dozen and the windfall should come to the people who did the actually hard part of building a successful company. And the ultra-litigious environment in the US is a huge drag on growth and productivity.
And yet... Yet...
It's highly likely that without Noah Glass Twitter wouldn't exist, and that Glass got, to use an admittedly inflamatory and imprecise term, "screwed".
In all likelihood any legal claim Glass would have is expired under statute of limitations and/or the small slice of Twitter equity he was given was in exchange for a waiver of legal claim.
When we reported that a man named Paul Ceglia came out of the woodwork with strikingly plausible evidence that Facebook founder Mark Zuckerberg gave him half of "the face book" for $1,000 while he was working on the site, TechCrunch commented that "the lesson is that you should never sell half of your company for $1,000."
Is the lesson of Noah Glass that you should always sue when you're pushed out of a startup?
If so, that's depressing, to say the least.
Our Reporting On Twitter's Founding:
- REVEALED: The Real History Of Twitter →
- Exclusive Q&A With Noah Glass, Twitter's Forgotten Founder →
Our Reporting On Paul Ceglia's Claim:
- The Guy Who Says He Owns 50% Of Facebook Just Filed A Boatload Of New Evidence -- And It's Breathtaking →
- THE FACEBOOK LAWSUIT: Here's What Happens Next -- And Who Is Likely To Pay →
- Zuckerberg Versus Ceglia: A Timeline Of Facts And Allegations →
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Qwiki's New iPad App Looks Beautiful, But All It Knows Are Wikipedia Intros
Qwiki will read Wikipedia to you and show you pictures related to over 3 million articles, but after every Qwiki was over, we were always left wanting more.
What originally started as a website has been released today as a great-looking iPad app.
Qwiki essentially reads a Wikipedia article to you, while displaying an animated slideshow of relevant images.
Qwiki has been around since last fall and shows a lot of promise. TechCrunch is so convinced that they awarded Qwiki $50,000 for winning their Disrupt contest, but then Qwiki's basic mechanics were duplicated with less than 400 lines of code.
The Qwiki-clone helped convince us further that Qwiki may just be a lot of hype.
When you boot up Qwiki, it's easy to find an article to watch and listen to, and the presentation is beautiful to watch. But then it ends, often abruptly, in a minute or so.
Qwiki constructs video learning experiences that feel formulaic, and you quickly realize that in most cases, Qwiki's (generally) eloquent robo-speaker simply reads the Wikipedia article's introduction and displays pictures from Wikimedia Commons [that are tagged with specific keywords related to the article].
After using the app today, we'd only end up using going forward if we could navigate the different sections of a Wikipedia article and choose which one we wanted to hear/see. Hearing an intro is not nearly enough.
In this regard, Qwiki is only as strong as the introduction written about a topic in Wikipedia. Sometimes, the app seems to pull the first paragraph from another segment of the Wikipedia article like, for George Clooney's "Personal Life" or "Humanitarian Work."
We wanted to learn more about Usain Bolt, but the Qwiki entry only contained a brief introduction talking about the world records he set. It would've been wonderful to see an option to watch his world record run at the Olympics.
A feature like this could truly set Qwiki apart from being a Wikipedia intro browser that integrates Wikimedia Commons pictures. But, we do like that you can access the actual Wikipedia article from within the app, which is great if you want to learn more.
Another issue we had is that some of the pictures included in Qwiki's aren't even always relevant. We watched a Qwiki on Soldier Field in Chicago and found ourselves staring at a US marine for a few seconds while Qwiki told us about Soldier Field's seating capacity (pictured).
We do, however, like the graphics the app uses to illustrate certain statistics, but we quickly tired of them after viewing several actors' Qwikis that all began with the same "how old is this person" illustration.
Don't believe us? Try out Qwiki for yourself on their website here or grab the free app from the App Store here. It's great fun for a while, but the fun unfortunately fades soon after.
Take a tour of Qwiki below, and then watch our video interview with one of the co-founders, Doug Imbruce, here.
Here is Qwiki's home screen, where you can tap to access categories like "Popular," "Actors," "Monuments," and featured selections. Tap one to begin.
Qwiki looks amazing, but lays the Ken Burns photo-zooming effect on thick. You can swipe to fast forward or rewind.
There's a cool animation that displays George Clooney's age, but it looks the same for every person in the database.
See the rest of the story at Business Insider
Please follow SAI: Tools on Twitter and Facebook.
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Eduardo Saverin Spent The Weekend Partying With Models In An $8,000/Night Hotel Room
What would you do if you had $2.5 billion in Facebook stock?
If you were Eduardo Saverin, you'd head to St. Tropez, spend $8,000 per night on the presidential suite at Hotel Byblos, buy $50,000 worth of Cristal, and party with "three mates and 10 leggy models."
According to Page Six, Saverin flew his buddies from Singapore to the French Riviera in July and has been throwing down ever since.
The crew hit St. Trope this past weekend.
Saverin was not wearing a shirt that said "Mark Zuckerberg screwed me over and all I got was this $2.5 billion settlement."
Related: The Facebook Movie Is An Act Of Cold-Blooded Revenge – New, Unpublished IMs Tell The Real Story
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The Reason Eduardo Saverin Isn't Listed As One Of Facebook's Top Shareholders
Facebook co-founder Eduardo Saverin sold some of his shares to Digital Sky Technologies, according to a new regulatory filing with the Securities and Exchange Commission.
At last report, Saverin was suspected to own around 5 percent of Facebook. But he was absent from Facebook's S-1 filing with the SEC.
That meant he either sold a part of his shares or they were diluted during an additional fundraising round. The new filing suggests the former.
The filing didn't indicate how many shares he transferred to DST.
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GOODBYE, AMERICA: Billionaire Facebook Cofounder Renounces Citizenship
Billionaire Facebook cofounder Eduardo Saverin is renouncing his citizenship ahead of the company's IPO at the end of next week.
Saverin is the cofounder who got booted from the company WAY back in 2005. They made a movie about it.
His 4 percent stake is worth about $4 billion and he's going to save a boatload on taxes with the move.
Singapore, where Saverin lives, does not have a capital gains tax.
He will have to pay an exit tax on his holdings, but it will be at Facebook's valuation now, not after the IPO.
“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” Tom Goodman, a spokesman for Saverin, tells Bloomberg's Danielle Kucera, Sanat Vallikappen and Christine Harper.
Mostly, Saverin got in the way of Facebook's early development. At one point, he froze the company's bank account because he wasn't getting enough attention. Still, he was its first outside investor. And for that, insiders have described him as one of the most important people in company history.
Click here to meet some more soon-to-be Facebook millionaires and billionaires >>
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Facebook's Cofounder Tries To Come Up With A Better Excuse For Renouncing His U.S. Citizenship
Eduardo Saverin, the billionaire cofounder of Facebook, outraged many Americans last week when he announced plans to renounce his U.S. citizenship, a move that many assumed was an effort to get out of paying taxes.
Now, Saverin's spokesperson is attempting to pour some water on the fire by arguing that taxes really had nothing to do with this decision. Instead, it's all about freeing up his ability to invest overseas.
“U.S. citizens are severely restricted as to what they can invest in and where they can maintain accounts,” Saverin's spokesman Tom Goodman said, according to the Wall Street Journal. “Many foreign funds and banks won’t accept Americans. This was a financial rather than a tax motive.”
As the Journal notes, some Americans who hope to live and invest overseas like Saverin do complain about extra red tape resulting from their U.S. citizenship, though the paper also points out that "people as wealthy as Mr. Saverin tend to have an easier time untangling red tape than the average U.S. retiree living abroad."
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Jim Rogers: The Media Is Getting Eduardo Saverin All Wrong — It's Very Expensive To Give Up Your Citizenship
Last week it was reported that Eduardo Saverin, co-founder of Facebook, was renouncing his U.S. citizenship ahead of the company's IPO.
But Jim Rogers, chairman of Rogers Holdings, who is a U.S. citizen and moved to Singapore in 2007, said Saverin renounced his citizenship a few months ago:
"The press seemed to say he did it to avoid [taxes], he has to pay taxes. He had to pay huge taxes, hundreds of millions of dollars to give up his citizenship and if it [Facebook] hadn't gone public or if something had gone wrong with the IPO, he would have been in a real bind.
When you give up your American citizenship, it's not fair as far as i'm concerned, but the rules are that you have to pay everything, you have to pay taxes on everything you own and then you can leave. I mean no other country in the world does that, we've got our own Berlin Wall, it's very expensive to leave, to give up your citizenship. Iran, North Korea and Cuba, and some countries it's impossible, very expensive to give up your citizenship."
Rogers moved to Singapore because he wanted his children to grow up fluent in Mandarin, but he said the country is very pro-business and is in the top 3 worldwide for doing business.
He said if people are discouraged with the U.S. should consider moving away but that it was a deeply "personal and difficult choice", and added that there's nothing wrong with it, that "this country was built on people who gave up their citizenship."
Don't Miss: Jim Rogers Identifies The Biggest Mistake China Is Making Right Now >
Please follow Business Insider on Twitter and Facebook.
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EXCLUSIVE: How Mark Zuckerberg Booted His Co-Founder Out Of The Company
Ahead of Facebook's $15 billion IPO later this week, Billionaire Facebook co-founder Eduardo Saverin has renounced his US citizenship in order to avoid a boatload of taxes.
One reason this is possible: Saverin no longer works at Facebook.
He hasn't since 2005, when CEO Mark Zuckerberg diluted Saverin's stake in Facebook and then booted him from the company.
Saverin's exit from Facebook was the central plot of "The Social Network."
Maybe you remember this scene?
"The Social Network" is a work of fiction, of course. But it's based on a true story.
This is that story.
This is the story of how Saverin got so angry at Zuckerberg—how, from Saverin's perspective, Zuckerberg screwed him out of a huge chunk of Facebook stock.
It's also the story of how Zuckerberg solved an early problem at Facebook, one that could have potentially prevented the company from becoming the global behemoth it is today.
The story is sourced from people involved in the founding year of Facebook, people close to Facebook, and documents viewed by Business Insider. It is an update to a previous story of ours, which included previously unpublished emails and instant messages between Mark Zuckerberg and early Facebook colleagues and confidants. This new version includes new material: Previously unpublished email correspondence between Zuckerberg and Facebook's early lawyers.
![Eduardo Saverin]()
"A sucker born every day."
"A sucker born every day."In late 2003, Harvard sophomore Mark Zuckerberg asked a Harvard student named Eduardo Saverin, a junior, to deposit $15,000 in a bank account that would be accessible to both of them. The money, Mark promised, would go toward the servers needed to host a site that Mark wanted to develop. The site would be called TheFacebook.com. Eduardo agreed.
Why did Zuckerberg choose Saverin to be his first business partner?
Zuckerberg, Facebook, and Saverin declined interview requests for this story, but we can infer some of Zuckerberg's thinking from instant messages he wrote during the time.
In one IM to a friend, Zuckerberg described his new partner, Saverin, as the "head of the investment society." Saverin was rich, Zuckerberg went on to say, because "apparently insider trading isn't illegal in Brazil."
Zuckerberg also partnered with Saverin because Saverin gave the impression he knew something about business. Saverin was the kind of guy who wore suits to class at Harvard, and he left people—including Zuckerberg—with the impression that he was connected to the Brazilian mafia.
In another IM conversation, this one from January 8, 2004, Mark described the arrangement this way:
Zuckerberg: Eduardo is paying for my servers.
Friend: A sucker born every day.
Zuckerberg: Nah, he thinks it will make money.
Friend: What do you think?
Zuckerberg: Well I don't know business stuff
Zuckerberg: I'm content to make something cool.
So Zuckerberg appears to have approached Saverin because Saverin had money and a vision for how to make more of it. Zuckerberg, meanwhile, wanted to "make something cool."
With Saverin's money paying for the servers, TheFacebook.com went live in February 2004. It was an instant sensation at Harvard. Students from other schools quickly clamored for the site's expansion, and Mark and his colleagues obliged.
![Eduardo Saverin]()
"I maintain that he fucked himself"
"I maintain that he fucked himself"Six months after thefacebook.com launched, as the summer of 2004 began, Zuckerberg and Moskovitz moved to Palo Alto, California where they planned to work on TheFacebook.com in a rented house. Saverin went to New York for an internship at Lehman Brothers.
According to instant messages from this period, before Zuckerberg left for the West Coast, he asked Saverin to work on three things: "to set up the company, get funding, and make a business model."
Almost immediately after the move, the relationship between cofounders began to fray.
At first, it was just a cultural divide. One awkward IM exchange reveals how different Zuckerberg's life in Palo Alto was compared to Saverin's life back on the East Coast:
Saverin: So you guys go out a lot to partiens [sic] and such there?
Zuckerberg: But in general we don't do fun things.
Zuckerberg: But that's OK because the business is fun.
Saverin: Lol yeah it is fun. No fun things though?
Zuckerberg: Eh, enough.
But then Saverin did something that really pissed Zuckerberg off: He ran unauthorized ads on Facebook.
Worse, the ads were for a startup Saverin was running entirely on his own, a job boards site called Joboozle.
Zuckerberg blasted Saverin for this in an email:
You developed Joboozle knowing that at some point Facebook would probably want to do something with jobs. This was pretty surprising to us, because you basically made something on the side that will end up competing with Facebook and that's pretty bad by itself. But putting ads up on Facebook to advertise it, especially for free, is just mean.
What finally ruined the relationship between Saverin and Zuckerberg for good was Facebook's need for funding.
As that first summer went on and TheFacebook.com grew more popular than anyone imagined, the company needed money to keep running. Finding investors wasn't hard. As early as July, Silicon Valley bigwigs like Mark Pincus, Reid Hoffman, and Peter Thiel were lining up to give Mark cash. Things were going so well, in fact, that Mark soon decided to commit to the company and not return to Harvard for his junior year.
What was hard, however, was getting Facebook co-founder Saverin's attention, getting him to make a decision, and getting him to sign off on the reformation of Facebook as a company under Delaware law —a crucial step before any funding deals could be completed.
At one point, Zuckerberg emailed Saverin to offer him frequent flyer miles if it would get him out to Palo Alto. Saverin didn't take the offer. The situation soon became critical, because without financing, TheFacebook.com would end up running on Zuckerberg family loans.
Eventually, Zuckerberg decided to solve the problem by cutting Saverin out of the company.
In an IM with Moskovitz, Zuckerberg explained why:
I maintain that he fucked himself…He was supposed to set up the company, get funding, and make a business model. He failed at all three…Now that I'm not going back to Harvard I don't need to worry about getting beaten by Brazilian thugs.
![sean parker]()
"I'm just going to cut him out."
"I'm just going to cut him out."When Zuckerberg and Moskovitz moved out to Palo Alto in June 2004, they ran into Sean Parker, an Internet startup kid best known for cofounding Napster. Parker soon joined TheFacebook.com.
Parker's first task was to do one of things Saverin was supposed to do, but hadn't yet: help Facebook find money. Parker had raised money for Napster and he knew his way around Silicon Valley. He quickly proved himself capable. For Zuckerberg, this only reinforced the idea that Saverin was expendable.
The only problem was: How would Zuckerberg cut Facebook's third-biggest stakeholder and co-founder out of the company?
In an IM exchange with Parker after a meeting with Peter Thiel, who would soon become Facebook's first outside investor, Mark and Sean discussed the Saverin problem. Zuckerberg hinted at a hardball solution, one based on some "dirty tricks" used by Peter Thiel.
Thiel had learned these tricks, Parker said, from one of the most legendary venture capitalists in the Valley, Michael Moritz of Sequoia. Sequoia has funded Google, Yahoo, PayPal, Zappos, and many other massive tech companies.
Parker: Peter [Thiel] tried some dirty tricks. All that shit he does is like classic Moritz shit.
Zuckerberg: Haha really?
Parker: Only Moritz does it way better.
Zuckerberg: That's weak.
Parker: I bet he learned that from Mike.
Zuckerberg: Well, now I learned it from him and I'll do it to Eduardo.
In later emails and IMs, we learn what "dirty tricks" Zuckerberg intended to pull to get TheFacebook.com funding without having to wait for sign-off from Saverin.
His plan: Reduce Saverin's stake in TheFacebook.com by creating a new company, a Delaware corporation, to acquire the old company (the Florida LLC formed in April), and then distribute new shares in the new company to everybody but Saverin. Mark discussed this plan with confidants over IM several times.
Here's one instance:
Confidant: How are you going to get around Eduardo?
Zuckerberg: I'm going to buy the LLC
Zuckerberg: And then give him less shares in the company that bought it
Confidant: I'm not sure it's worth a potential lawsuit just to redistribute shares. You have nothing to gain.
Zuckerberg: No I do because until I do this I need to run everything by Eduardo. After this I have control
In another, Mark writes:
"Eduardo is refusing to co-operate at all…We basically now need to sign over our intellectual property to a new company and just take the lawsuit…I'm just going to cut him out and then settle with him. And he'll get something I'm sure, but he deserves something…He has to sign stuff for investments and he's lagging and I can't take the lag."
Zuckerberg pulled the trigger, sending an email to his lawyer telling him to put the plan into effect.
In this previously unpublished email, Zuckerberg writes of Saverin: "Is there a way to do this without making it painfully apparent to him that he's being diluted to 10%?"
In response, Zuckerberg's lawyer issues a prescient warning:
"As Eduardo is the only shareholder being diluted by the grants issuances there is substantial risk that he may claim the issuances, especially the ones to Dustin and Mark, but also to Sean, are a breach of fiduciary duty later on if not now. "
The plan works
In the middle of that summer, Zuckerberg's plan to oust his cofounder went off without a hitch.
On July 29, 2004, the new company, TheFacebook.com was incorporated in Delaware. Then it acquired the old company, formed back in April as an LLC in Florida.
On September 27, 2004, Peter Thiel formally acquired 9% of the new company with a convertible note worth $500,000. Before the transaction, Facebook ownership was divided between Zuckerberg, with 65%, Saverin, with 30%, and Moskovitz, with 5%. After the transaction, the new company was divided between Zuckerberg, with 40%, Saverin, with 24%, Moskovitz, with 16%, and Thiel with 9%. The rest, about 20%, went to an options pool for future employees. From there, a good chunk of equity went to Eduardo's replacement, TheFacebook.com's new COO, Sean Parker.
On October 31, 2004, Saverin signed a shareholder agreement that alloted him 3 million shares of common stock in the new company. In the agreement, he handed over all relevant intellectual property and turned over his voting rights to Mark Zuckerberg. Zuckerberg became Facebook's sole director.
On January 7, 2005, Zuckerberg caused Facebook to issue 9 million shares of common stock in the new company. He took 3.3. million shares for himself and gave 2 million to Sean Parker and 2 million to Dustin Moskovitz. This share issuance instantly diluted Saverin's stake in the company from ~24% to below 10%.
Mark's plan had succeeded. Eduardo was, for all intents and purposes, gone.
Bringing down the house
In a testament to how little Saverin was involved in Facebook's operations after Zuckerberg left Harvard, Saverin apparently only found out how badly he'd been diluted in April 2005, when TheFacebook.com sent him a letter seeking approval for its second formal round of funding.
Fifteen days after that letter was sent from TheFacebook.com's HQ, one came back from Eduardo's lawyers. The next day, Zuckerberg finally fired Saverin.
It was this moment in history that "The Social Network" attempted to capture in the scene we embedded at the start of this story.
The lawsuits predictably followed.First, Facebook filed a lawsuit against Saverin, arguing that the stock-purchase agreements he had signed in October were invalid. Then Saverin sued Zuckerberg, alleging he spent Facebook's money (his money) on personal expenses over the summer.
The jilted Saverin grew bitter. At one point, he reached out to Cameron Winklevoss, Tyler Winklevoss, and Divvya Narendra – the Harvard students who allege that Mark Zuckerberg stole their idea for the company in the first place.
Eventually, sources say, Saverin decided to attack Zuckerberg's reputation.
He approached Ben Mezrich—the author of Bringing Down The House, a book about how a group of MIT students made it big in Vegas—and offered him a book about how a group of Harvard students made it big in Silicon Valley. Bringing Down The House makes its characters out to be rock stars and scoundrels; the Facebook book, Accidental Billionaires, does the same.
Then in 2010, Columbia Pictures made a movie based on the book. It features cocaine, models, and dark, moody, lighting from David Fincher, the director who brought you "Fight Club." It's a good flick. Because of its source material, it makes Saverin into more of a victim than he really was.
After Saverin began talking to Mezrich, he and Facebook settled their lawsuits. Facebook went from officially denying Saverin's status as a cofounder to listing him as one on its Web site. As a part of the settlement, Saverin stopped talking to the press.
Like the Winklevoss brothers, Eduardo Saverin clearly felt he got screwed by Mark Zuckerberg in Facebook's early days, and in one way, he did.
We can tell from the previously unpublished letter included in this story that Zuckerberg didn't really want Saverin to notice his stake in Facebook was being diluted.
But also like the Winklevosses, Saverin won huge in the end. Thanks to Zuckerberg and the rest of the Facebook team, Saverin's little $15,000 investment is now worth more than $4 billion, with no further effort from himself.
Having renounced his US citizenship to avoid paying a boatload of taxes on his Facebook wealth, Saverin now resides in Singapore.
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EXCLUSIVE: Here's The Email Zuckerberg Sent To Cut His Cofounder Out Of Facebook
Billionaire Facebook cofounder Eduardo Saverin – the guy everyone now hates because he's renouncing his US citizenship in order to avoid a lot of taxes – hasn't worked at Facebook since 2005. That's when CEO Mark Zuckerberg diluted his stake and then booted him from the company.
Saverin's exit from Facebook was the central plot of The Social Network.
Maybe you remember this scene?
Today we have a long, detailed re-telling of the true story behind the movie.
The basics: Saverin was tasked with running Facebook's business side while Zuckerberg worked on the product. But instead of joining the company out in Palo Alto, Saverin stayed on the East coast and worked on another startup. Eventually, he started to feel left out, and he froze Facebook's bank account.
To ease Saverin out and limit his say over how Facebook would be funded, Zuckerberg reduced Saverin's stake in the company.
Zuckerberg did this by creating a new company to acquire the old company and then distribute new shares in the new company to everybody but Saverin.
Well now, thanks to a well-placed source, we've come up with something cool.
It's the email then 20-year-old Mark Zuckerberg sent his lawyer giving him the go ahead to draft paperwork that would result in Saverin's dilution.
We love the email because it's an artifact of a young Mark Zuckerberg – a man who has grown up a lot since he wrote it, and will be in our lives for a very long time.
The fun part is where Zuckerberg says to his lawyer: "Is there a way to do this without making it painfully apparent to him that he's being diluted to 10%?"
The full letter:
[Redacted],
This email should probably be attorney-client privileged, not quite how to do that though.
Anyhow, Sean and I have agreed that a price of one-half cent per share is the way to go for now. We think we can maybe almost justify and if not, we'll just deal with it later.
We also agreed that if the company bonusing us the amount we need for the shares, plus tax, is a good solution to the problem of us all being completely broke.
As far as Eduardo goes, I think it's safe to ask for his permission to make grants. Especially if we do it in conjunction with raising money. It's probably even OK to say how many shares we're adding to the pool. It's probably less OK to tell him who's getting the shares, just because he might have adverse reaction initially. But I think we may even be able to make him understand that.
Is there a way to do this without making it painfully apparent to him that he's being diluted to 10%?
OK, that's all for now. I'll send you the list of grants I need made in another email in a second. Sean can send you grants for his people when he stops coughing up his lungs.
Hope you guys both feel better,
Mark
And here's part of the lawyer's response:
…I spent some time discussing the risks associated with making these grants and picking the per share price of common stock. Mark, you and I should discuss these at length to insure that you understand them. I've outlined them below for your easy reference.
The broad categories of legal risk are a) fiduciary duty. As Eduardo is the only shareholder being diluted by the grants issuances there is substantial risk that he may claim the issuances, especially the ones to Dustin and Mark, but also to Sean, are a breach of fiduciary duty later on if not now. I believe that you previously disclosed these future dilutative issuances to Eduardo before the LLC merger. This is what I recommended at the time. Nevertheless, it would be great if there is some way you could obtain a shareholder consent from Eduardo approving these new issuances. It isn't *required* but it would be very advantageous and would go a very long way towards preventing any future claims he might have for breach of fiduciary duty. I mentioned this to Sean and he was going to give it some thought.
In the end, the lawyer was right to worry.
Saverin eventually sued Facebook over breach of fiduciary duty. Facebook and Saverin settled, and he walked away with 4% or 5% of the company. That stake is now worth close to $5 billion.
Meanwhile, Facebook has done pretty well with Zuckerberg running the show with sole authority.
Eight years after its creation, Facebook will raise $15 billion in an IPO this Friday that will value the company at somewhere around $100 billion.
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AMERICA, ASCHMERICA: Billionaire Facebook Cofounder Saves $67 Million Renouncing Citizenship
When we learned that Facebook cofounder Eduardo Saverin renounced his US citizenship, we assumed it might have something to do with avoiding US taxes.
His stake is worth $4 billion to $5 billion, and even a small percentage of that amount can really add up.
Turns out we were on to something.
Taking a low estimate of Saverin's stake – valuing it at $3 billion – Bloomberg's Jesse Drucker concludes that Saverin will save at least $67 million giving up on the red, white, and blue.
Bloomberg calculated the $67 million figure by applying the 15 percent U.S. capital gains rate to the approximate $448 million spread between the two values. Bloomberg’s methodology was reviewed by Robert Willens, an independent tax adviser based in New York…
…His savings may be even greater because Saverin’s tax advisers could argue that the value of his stake in September was less than the $2.44 billion used in Bloomberg’s calculation because selling such a large amount of stock at the then-market price wasn’t possible.
Saverin's spokesperson insists that the tax savings are not his motivation.
“The calculations and assumptions are not only erroneous, they also further perpetuate the false impression that tax was the reason behind Eduardo’s decision,” this spokesperson told Bloomberg.
“His motive had nothing to do with tax and everything to do with his desire to live and work in Singapore.”
Related: EXCLUSIVE: Here's The Email Zuckerberg Sent To Cut His Cofounder Out Of Facebook
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Expat Facebook Cofounder Eduardo Saverin Has A Bentley And Doesn't Know How To Spend His IPO Billions
Facebook cofounder Eduardo Saverin, recently making headlines for exiting the United States by renouncing his citizenship, is apparently living quite the life in Singapore.
A new profile in the New York Time has a lot of interesting details about the new billionaire's playboy lifestyle. He's apparently so rich that he doesn't even know how to spend his money:
Thanks to the interconnected world Mr. Saverin helped to create, the Internet is full of people sharing photos and stories of him embraced by statuesque women and drinking expensive Champagne. “It’s a misperception, especially the playboy,” he said. “I do have a Bentley. I do go out. I’d rather not go into personal details.”
...As for himself, good advice for the single young billionaire is harder to find. He said he had spoken with a number of people with tremendous wealth, “but every experience is unique. Certainly there has been no one who was a college kid, and got it this fast.”
“What does this enable me to do? What am I provided with to help?” he asked. “Right now, I don’t know how to deploy the capital and the blessings.”
As for Facebook's upcoming IPO on Friday, Saverin told the New York Times he would watch the IPO quietly with a few friends in Singapore—which would happen in the middle of the night.
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These Senators Are Going After Facebook Cofounder Eduardo Saverin For Trying To Avoid A $67 Million Tax Bill
Eduardo Saverin, co-founder of Facebook, is saving at least 67 million in tax dollars by renouncing his U.S. citizenship.
Chuck Schumer (D-NY) and Bob Casey (D-PA) aren't happy about that.
The two Senators will introduce the "Ex-PATRIOT Act" to punish ex-citizens who ditch the U.S. for lower tax rates.
It's short for "Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy."
Current law would already bar Saverin from reentering the country if it's determined that he left for tax-related reasons.
But Schumer and Casey want to improve the law by imposing a new capital gains tax on wealthy individuals like Saverin who renounce citizenship and move to tax havens. If the expats don't pay, they can't come back.
They made it very clear the legislation is about Saverin.
“Mr. Saverin has decided to ‘defriend’ the United States of America just to avoid paying his taxes. We aren’t going to let him get away with it so easily,” Schumer said in a statement.
Saverin's spokesman said last weekend it's not about the taxes, it's about finances.
To renounce his citizenship, Saverin had to pay an "exit tax," which let the government collect some of the taxes he would have paid if he stayed, he told the New York Times.
Saverin now lives in Singapore, where the capital gains tax is... 0%.
"It’s infuriating to see someone sell out the country that welcomed him and kept him safe, educated him and helped him become a billionaire," Schumer said in a release. "This is a great American success story gone horribly wrong. We plan to put a stop to this tax avoidance scheme. There should be no financial gain from renouncing your country."
The most surprising thing about the legislation is that it targets anyone with a net worth above $2 million or an average income tax liability of at least $148,000 in the past five years. Expats who meet either criterion "will be presumed to have renounced their citizenship for tax avoidance purposes."
These expats will get the chance to prove to the IRS they have other reasons to expatriate, but the IRS has the final say.
Senator Casey couched the legislation in Occupy terms: ”We simply cannot allow the ultra-wealthy to write their own rules.”
In the meantime, Saverin, who told the New York Times that he fancies himself a "global citizen," will keep raging in Singapore.
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AMERICA WINS: Facebook Co-Founder Eduardo Saverin Will Pay His Taxes (AAPL)
Eduardo Saverin, co-founder of Facebook, could have saved at least $67 million by renouncing his U.S. citizenship and moving to Singapore, where the capital gains tax is 0%.
According to CNN's Dana Bash, Saverin might pay those taxes after all. "He intends to pay all taxes he owes on us investments, despite renouncing us citizenship," she tweeted.
Earlier today, senators Chuck Schumer and Bob Casey announced legislation that would impose a 30% capital gains tax on expats who leave the country for lower tax rates on investments. The senators mentioned Saverin by name in their press conference.
Looks like it worked! America wins!
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The Government Wanted To Rewrite The Expat Tax Code And Now It Has The Perfect Excuse
May 22, 2012
Los Angeles, USA
This week, the universally stupid brainchild of US Senators Chuck Schumer and Bob Casey known as the Ex-PATRIOT Act inched a bit closer towards becoming law.
‘Ex-PATRIOT’ is an absurd acronym that stands for “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy”. I call it the Tax Slave Act… and it proposes three key provisions:
1) Individuals who are deemed, in the sole discretion of the US government, to have renounced US citizenship in order to avoid US taxes, will be permanently barred from re-entering the United States.
2) Such individuals will also be required to pay a 30% capital gains tax to the United States government on ALL future investment gains derived from the US. Currently, non-citizens who do not reside in the US pay no US capital gains tax.
3) These proposals are RETROACTIVE, and, if passed, would apply to anyone who renounced his/her citizenship within the last 10-years.
During a Sunday interview with ABC News, House Speaker John Boehner threw his support behind the bill… certainly a big step towards its eventual passage.
Let’s pause briefly for a little history lesson–
Dart Container Corporation was founded in 1960 by William F. Dart, the man who first perfected the design of styrofoam. Dart Container is today a multi-billion dollar family-owned company with thousands of employees and operations around the world.
In the early 1990s, brothers Kenneth and Robert Dart, heirs to the family fortune, renounced their US citizenship and became citizens of Belize and Ireland, and set up residency in the Cayman Islands.
Around the same time, several other wealthy Americans renounced citizenship, including Carnival Cruise Lines founder Ted Arison (who obtained Israeli citizenship), Campbell Soup heir John Dorrance (Irish citizenship), and fund manager Mark Mobius (German citizenship).
President Clinton was furious, and in 1996, he pushed Congress to pass a series of financial penalties for people who renounce citizenship. At the time, a ‘renunciant’ had to continue filing US tax returns for 10-years after renouncing.
Effectively, though, this penalty was a tax on worldwide income, not an exit tax on assets.
Fast forward to the mid-2000s, a time when the asset bubble was at its peak; the stock market was at its all-time high and real estate prices kept going up.
The Bush regime passed a series of changes to expatriation rules, dropping the income tax filing requirements in lieu of charging a one-time exit tax on assets.
In this way, the government was able to derive a much larger payment up front based on total assets rather than chasing around a former citizen for a piece of annual income.
In the years since the exit tax on assets was established, two things have happened:
1) The number of Americans renouncing US citizenship has risen steadily, from 235 people in 2008 to 1,780 last year (according to Schumer’s office).
2) The asset bubble has burst, and assets are worth much less than just a few years ago. As such, the government isn’t collecting as much revenue from the exit tax.
My sense is that the government has been watching the number of expatriates rise over the years, and simultaneously watching the value of the exit tax fall… and they’ve been looking for an excuse to make sweeping (i.e. retroactive) changes.
Eduardo Saverin is the perfect excuse. The Facebook co-founder’s recent renunciation of US citizenship has become a rallying cry for politicians to go back in time and steal money from former citizens retroactively…plus establish a larger base for future tax revenues.
This is a truly despicable thing to do considering that these former citizens followed the appropriate rules at the time, paid the tax, and moved on with their lives. Now Uncle Sam wants to go back in time to unilaterally change the deal, and expect everyone to abide even though they’re not even citizens anymore. The arrogance is overwhelming.
More importantly, this bill is also a major deterrent for people who are thinking about renouncing US citizenship today.
The passage of this law will undoubtedly cause many people who were considering expatriation to abandon the idea altogether as the thought of being permanently barred from entry is too much to bear.
It’s truly extraordinary that the Land of the Free has deteriorated to the point that the government must now resort to threats, coercion, and intimidation in order to keep its most productive citizens inside.
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Facebook's Cofounder Forgives Zuckerberg: "I Have Only Good Things To Say About Mark"
Facebook's co-founder Eduardo Saverin really wants the world to know that he doesn't hold a grudge against Mark Zuckerberg for being pushed out of the company in its early days. In fact, he thinks Zuckerberg is a visionary.
"I have only good things to say about Mark, there are no hard feelings between us," Saverin said in an extensive interview this weekend with Veja, a Brazilian publication (translation via Forbes). "He was a visionary, he always knew that the only way to get Facebook to grow was to maintain its central idea, that of people truly presenting themselves as they are, without nicknames or pseudonyms."
Saverin released a similar statement earlier this month, writing a note on Zuckerberg's Facebook wall to congratulate him on the success of the company on the eve of the IPO.
Saverin certainly has plenty of reason to be upset at Zuckerberg, who was responsible for diluting his stake in Facebook and ultimately booting him from the company in 2005, but Saverin claims to be over it. This probably comes as a shock to anyone who has seen The Social Network and watched the fallout between Saverin and Zuckerberg unfold on the big screen.
However, in the interview, Saverin dismisses the portrayal of Facebook in the movie as "fantasy" and suggests that it exaggerated the tension between him and Zuckerberg.
"I would never throw a laptop at someone, like it appears in the movie," he said. "Not even at Mark."
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