Poor Facebook

The Facebook IPO invites endless speculation. And yet, if there was fraud, what was the fraud? I’ve been waiting for years for someone to tell me how Facebook will make money. No one has ever said “Facebook has a the secret X technology with which it can make $1.2 trillion dollars.” There has been no obvious fraud. What I have seen is a lot of self-induced euphoria, followed by hysteria. Facebook is like the girl who becomes wildly popular at school for no reason, and then one day people are like, “Why do we like her?” and then people hate for having “fooled” them, even though the girl did nothing except not disuade people who were persuading themselves. A personal story: I was in Poland when the IPO happened and Poles who knew nothing about technology or finance were telling me I should invest. If you have read any good books about 1929, you can recognize that as a red flag. I thought, based on that alone, that clearly Facebook would be overvalued.

The junior analyst in the case, identified by people close to the matter as Eric Jacobs, was fired on Sept. 27, Massachusetts said in the consent order on the Citigroup case.

Citigroup Global Markets Inc., the bank’s investment-banking arm, admitted to the regulator’s statement of facts and agreed to permanently cease and desist from violating state securities laws.

A Citigroup spokeswoman said, “We are pleased to have this matter resolved. We take our internal policies and procedures very seriously and have taken the appropriate actions.”

The consent order said that on April 30, the senior analyst—identified by people familiar with the case as Mr. Mahaney—provided unpublished information about revenue estimates for Google’s YouTube unit to a reporter for Capital, a French business magazine.

He then allegedly told a communications employee at Citigroup that he hadn’t responded to the magazine reporter’s questions. The employee told the reporter the analyst wasn’t available—prompting the reporter to say he had already responded, the state said in the consent order.

When told that an interview request would have to be approved, the analyst urged a research-department employee to submit approval for an interview the next day, a Tuesday, the order said.

When told that the request for a Monday post-interview approval had already been submitted, Massachusetts’ complaint alleges, the analyst responded, “This could get me in trouble. Shoot.”