Republican admits Facebook fraud

A former Oregon Republican governor candidate, Craig Berkman, has pleaded guilty to defrauding Facebook investors.

Berkman told investors that he could use their money to buy shares of Facebook before the company’s May 2012 initial public offering.

He claimed that he had access to scarce pre-IPO shares of Facebook as well as LinkedIn, Groupon and Zynga.

What he did was use investor money to make payments to earlier investors in a classic Ponzi scheme. The rest of it went to pay personal expenses, including $6 million in a personal bankruptcy case.

Berkman admitted one charge of securities fraud and one charge of wire fraud. Each carries a maximum sentence of 20 years in prison.

According to Reuters, Berkman told the court that he deeply regretted his actions. He said that he had devastated his family and investors, saying some of them were “dear, dear friends”.

As part of a plea deal, Berkman agreed to forfeit $13.2 million he raised from more than 120 investors.

Berkman served for a time as the head of the state’s Republican party. He lost in the Republican primary for governor in 1994. He was thinking at having another go in 2002.