Bitcoin Billionaires

by Ben Mezrich

  Only they knew the true story and what really had gone down after Cameron’s one-on-one meeting in that glass cage. How, in the blink of an eye, they somehow lost by winning.

  * * *

  “Sixty-five million dollars!” Calamari, their lawyer, was nearly shouting at them. He held the one-page, handwritten settlement offer in one hand and a slice of pizza in the other. “This is incredible. Don’t you see that this is incredible?”

  Teardrops of melted cheese were falling from the end of the pizza as he waved it toward the twins. The casual dress lawyer was clearly excited about the settlement offer.

  Tyler stared at the settlement offer dangling from Calamari’s hand. Sixty-five million dollars sounded great until you juxtaposed it with Zuckerberg’s fifteen-billion-dollar (and growing) slice of the pie.

  “There’s something missing here,” Tyler started, when Calamari cut him off, that damn slice of pizza swinging so hard it threatened to break free from the man’s fingers and rocket toward the twins.

  “Are you kidding? Guys, it’s Christmas in February! He’s agreed to settle. And it’s a fortune!”

  Tyler looked at Cameron, who looked just as exasperated as he felt. Sure, Zuckerberg had offered to settle. As stubborn as he was, he was probably always going to settle. He might wait until the eve of trial and settle on the courthouse steps, but he was going to settle. Even if deep down the Facebook CEO didn’t think the Winklevosses’ claims had merit, they had always assumed that he knew they had enough—the atmospherics alone were too much—and there were the emails. There were a lot of emails, and the twins thought they were damaging enough to tie him up in knots and turn him into a human pretzel on the stand. A public trial had to be too risky to consider. Fraud was not something to leave to twelve jurors to decide. Worse yet, Zuckerberg knew that the other side was pushing for forensic discovery—electronic imaging—of his computer’s hard drive, the same computer he’d used while back at Harvard. As the twins would find out later, Zuckerberg had good reason not to want to let that happen.

  Facebook was a monster, a true Silicon Valley unicorn that was gaining millions of users by the day. Zuckerberg had become internationally famous, the young CEO of a company that was rapidly becoming one of the biggest success stories in the world. Soon, no doubt, Facebook would seek an IPO, and the last thing Zuckerberg or Facebook’s board of directors needed before offering its stock up to the public was the unearthing of potentially damning documents.

  Zuckerberg had to know where such a process would lead. The hard drive from his college computer contained a trove of instant messages (IMs) that Zuckerberg had written while he was a student at Harvard. Some of them were to Adam D’Angelo, a friend and talented computer programmer who had attended CalTech and was now Facebook’s CTO. These messages had been discovered during a court-ordered forensic analysis of Zuckerberg’s hard drive, but Zuckerberg’s attorney Neel Chatterjee had so far refused to provide them to the other side. It was a classic example of Schrödinger’s cat—these IMs didn’t exist if he settled—they existed if he continued to dig in his heels. And even if they were produced to the other side under a protective order, there was no way of guaranteeing they wouldn’t find their way onto the internet, a medium written in pen, not pencil.

  Eventually, of course, Zuckerberg and his team’s fears would be realized, but luckily for him not until years after he settled with the twins. A particularly intrepid journalist at Business Insider, Nicholas Carlson, got a hold of a number of those IMs, which were later confirmed by Zuckerberg himself when they were republished by The New Yorker.

  In one message, Zuckerberg spoke with D’Angelo about the Harvard Connection/ConnectU website he was working on for Tyler, Cameron, and Divya. As reported by Carlson in the Business Insider, Zuckerberg remarked to D’Angelo:

  So you know how I’m making that dating site. I wonder how similar that is to the Facebook thing. Because they’re probably going to be released around the same time. Unless I fuck the dating site people over and quit on them right before I told them I’d have it done.

  From there, Zuckerberg’s thoughts only got more damning:

  I also hate the fact that I’m doing it for other people haha. Like I hate working under other people. I feel like the right thing to do is finish the facebook and wait until the last day before I’m supposed to have their thing ready and then be like “look yours isn’t as good as this so if you want to join mine you can otherwise I can help you with yours later. Or do you think that’s too dick?

  D’Angelo later asked Zuckerberg what path he was going to pursue in terms of dealing with the twins. Zuckerberg responded:

  Yeah, I’m going to fuck them Probably in the year—*ear

  In legal terms, the IMs may have been in a gray area—they were not a smoking gun—but they were still dangerous. With respect to Zuckerberg’s moral character at that point in his life, they were less gray than black-and-white. When in another IM he told his friend “You can be unethical and still be legal—that’s the way I live my life,” he was voicing a philosophy that would make future Facebook stockholders rightly nervous. No doubt, in the years since college, Zuckerberg had changed—how could someone go through what he went through and not change in all sorts of ways, most of which would remain unknown to most of the world? Perhaps, as he’d later tell The New Yorker, he truly regretted the sentiments in those IMs. But the IMs were only part of the story; there were also actions that went along with those words.

  Before the Winklevoss twins had approached Zuckerberg, his bold venture at the time was facemash.com, a Harvard version of the website Hot or Not? This site scraped photos of Harvard female students from the online Harvard directory and, without their consent, displayed these photos, two at a time and side-by-side, on facemash.com so visitors to the website could rate who was the “hotter.” In one IM exchange, he even considered whether or not he should allow these photos of Harvard females on facemash.com to be compared side-by-side to photos of farm animals. This resulted in charges that he breached the Harvard computer network security, violated copyrights, and violated individual students’ privacy and almost got Zuckerberg expelled by the Harvard Administrative Board, but in the end he was put on probation.

  After being left in the lurch by Zuckerberg and surprised by the launch of Facebook on February 4, 2004, the twins and their friend Divya scrambled to find programmers to finish ConnectU, which finally went live on May 21, 2004. Not content with merely sandbagging his classmates and the enormous first-mover advantage it afforded him, Zuckerberg appeared to be determined to add insult to injury. As reported in the Business Insider, Zuckerberg recounted to D’Angelo via IM:

  We’ve exploited a flaw in their [the ConnectU] system and created another Cameron Winklevoss account. We copied his account like his profile and everything except I made his answers all like white supremacist.

  The fake account Zuckerberg created to impersonate Cameron was not just an assault on Cameron’s character. It is also a revealing insight into how Zuckerberg had seen—and judged—the pair from the moment he’d met them in the Kirkland dining hall.

  CAMERON WINKLEVOSS

  Hometown: “I’m fucking privileged. where do you think I’m from?”

  High School: You’re not even allowed to speak its name.

  Ethnicity: Better than you.

  Height: 7’4”

  Body type: Athletic.

  Hair Color: Aryan Blond

  Eye Color: Sky Blue

  Favorite Quote: “Homeless people are worth their weight in paper clips—I hate black people.”

  Languages: WASP-y

  Clubs: My dad got me into the Porcelain

  Interests: Squandering my father’s money …

  If he had indeed hacked into the website he was supposed to have helped build, in the twins’ opinion, Zuckerberg had potentially violated federal law. And the fake profile was just the start. In later IMs, Zuckerberg bragged about further hacking ConnectU’s code a
nd deactivating user accounts, just for fun.

  And there was more. In the spring of 2004, Cameron sent an email to the “tips” email inbox of the Harvard Crimson to notify them about Zuckerberg’s duplicitous behavior. A reporter named Tim McGinn was assigned to the story and began to investigate. Tim met with Cameron, Tyler, and Divya to hear their story and to review emails sent between Cameron and Mark. He then reached out to Zuckerberg for his side of the story. As Cameron was later informed, Zuckerberg went into the Harvard Crimson offices and tried to convince McGinn and his editor, Elisabeth Theodore, not to run with the story. When McGinn and Theodore decided to continue the investigation, Zuckerberg apparently hacked into McGinn’s Harvard email account to try and keep track of the investigation and whether or not a story would be written.

  As Cameron learned, Zuckerberg was able to hack into McGinn’s email by exploiting the data in the Facebook database and violating the trust and privacy of his own users. More specifically, apparently he looked in the Facebook database for McGinn’s Facebook account password, in hopes that McGinn used the same password for his Facebook account as he did for his Harvard email account. He also reviewed Facebook logs for all of McGinn’s failed login attempts, thinking that McGinn had at some point mistakenly entered his Harvard email account password into Facebook when trying to log in. Armed with McGinn’s private information dug out of the bowels of Facebook, Zuckerberg was able to break into McGinn’s email and read all of his emails, including the ones he’d had with Cameron, Tyler, and Divya. Mark also saw email communication between McGinn and Theodore, in which Theodore recounted their meeting with Zuckerberg at the Harvard Crimson offices: “[Zuckerberg] did seem very sleazy. And I thought that some of his answers to the questions were not very direct or open. I also thought that his reaction to the website was very very weird.”

  While Zuckerberg’s hack of ConnectU was arguably outside the university’s jurisdiction, Zuckerberg’s hacking of another student’s Harvard email account was not. In fact, it breached the Harvard computer network security and violated an individual student’s privacy (not to mention Facebook’s own privacy policy today) and Zuckerberg was already in trouble for similar violations as a result of the facemash.com debacle earlier that school year.

  At the time, Harvard was unaware of Zuckerberg’s additional violations. A few years later, however, Zuckerberg’s second offense became public. Despite the fact that Zuckerberg was, and still is, a Harvard student to this day—he left indefinitely on a voluntary leave of absence to run Facebook after his sophomore year—Harvard has never taken any public action related to this hacking.

  In total, the existence of that hard drive from Zuckerberg’s college computer must have meant he’d never risk a trial, and not just because his IMs regarding the twins would blemish his sterling reputation as a boy wonder CEO, but more importantly, because they would call into question the very basis of the revolution he was creating:

  If you ever need info about anyone at Harvard just ask.

  I have over 4000 emails, pictures, addresses, SNS.

  People just submitted it. I don’t know why. They “trust me.” Dumb fucks.

  Private IMs between any other college kids could perhaps be explained away as the digital equivalent of “locker room” talk. But in the context of a college dropout whose mission was to “connect the world” and by doing so would hold the privacy of millions of people in the palm of his hand, they had the potential to permanently derail him. And certainly, to the twins, the IMs proved what they had been saying all along: Zuckerberg had knowingly wronged them. The image of a likable nerd who wore a hoodie and talked about building things that are “cool” was not the Mark Zuckerberg they knew. Those stark words and actions revived an anger in them that made it difficult to let things go, even when it seemed, to their legal team, that they had won.

  “This is bullshit,” Tyler said, still looking at the paper covered in chicken scratch. “We deserve to be rightful owners.”

  Calamari was still grinning over his celebratory pizza. He had just finished a call with John Quinn, the Quinn in Quinn Emanuel, presumably to brag about the potential settlement result. They didn’t get it; these lawyers didn’t get a lot of things. Calamari could barely operate the PowerPoint presentation that their lead lawyer had prepared for the opening mediation argument. The irony of a lawyer who could barely operate a computer being a principal in the fight over one of the largest technology companies in the world was almost too much. Calamari mispronounced Zuckerberg’s name a handful of times, calling him “Zuckerberger,” and now he was doing an end zone dance with John Quinn before the ink on the offer sheet had even been applied, much less dried.

  To Tyler, this wasn’t about money; this had never been about the money. As Zuckerberg had so delicately pointed out in the fake profile he’d made of Cameron, Tyler and Cameron had been born into money. But what Zuckerberg didn’t know was that their father had built that privileged childhood for them through sweat, brains, and character. He’d propelled himself upward from a heritage of hardworking German immigrants, a family of coal miners, and he’d made it his mission to instill in the brothers a sense of right and wrong so strict that it could often be blinding. Winning didn’t matter if it didn’t happen the right way, for the right reasons.

  Tyler simply couldn’t just walk away, not even for $65 million in cash.

  “We’ll take it in stock,” he said suddenly. Cameron nodded. Calamari’s face blanched. His greasy slice of pizza made a wet thud on the table.

  “Are you crazy, you want to invest in that putz?!” Calamari exclaimed, looking incredulous, then glaring at his associates to nod their heads in disapproval. Immediately, he and his team embarked on a campaign to convince Tyler and Cameron that they were being foolish, batshit crazy, that they should take the cash and run. It appeared that lawyers didn’t like getting paid in stock, the price of which could go up or down. For them, cash was king. All of a sudden Quinn Emanuel’s 20 percent contingency fee, a cool $13 million for six months of work, looked a lot more uncertain.

  All five Quinn Emanuel lawyers in the room pleaded with the twins, but they would not be swayed. In the twins’ minds, taking stock was a way of going back in time and righting a wrong. As founders, who hadn’t been cut out by Zuckerberg, they would have had stock. Here, after all these years, was their chance to get back, at least in part, to where they should have started. A hundred lawyers in Hawaiian shirts and sandals wouldn’t be able to convince them otherwise.

  Ultimately, the twins and their lawyers reached a compromise; the twins would take 20 million in cash, and the rest of the $65 million settlement (approximately $45 million) in stock. For the foolish, batshit crazy twins, this proved to be one of the greatest investments of all time. Their lawyers saw none of that upside.

  After Facebook’s IPO, the twins’ $45 million in shares soared. It appreciated fifteen times and went on to be worth more than $500 million. If Quinn Emanuel had taken its fee in stock, the firm would have earned upward of $300 million for six months of work.

  * * *

  Sitting in that boat, drifting in near silence down the center of that man-made lake in New Jersey, watching the other boats head for the boathouse, Tyler was palpably aware of the toll that the fight had taken on them. The more public their battle had become—culminating in the movie that had made them household names—the more they had come under assault, both legally and in the public eye.

  Shortly after they’d settled, the twins learned that Facebook had received a valuation that had been conducted by an independent, third-party valuation firm. This valuation, which Facebook used to comply with IRS rules and the US tax code, valued the twins’ Facebook shares at a quarter of the price they had used in reaching the settlement—was it another ear fucking?

  It certainly sounded like securities fraud to the twins, the withholding a material, independent valuation during a settlement agreement that involved a securities transaction, but Faceboo
k maintained that they had not withheld anything, or deceived anyone.

  Armed with both the valuation and the leaked IMs that had come out via Business Insider, the twins had tried to get the case reopened—an effort that was shot down by a California federal judge, and the verdict was later upheld by California’s Ninth Circuit Court of Appeals. Both courts rejected the twins’ arguments. The result hadn’t been surprising to the twins; they were fighting Facebook, now a hundred-billion-dollar monster, in its own backyard. The stakes had become enormous, and the twins and Zuckerberg weren’t the only ones at the table. President Obama had visited Facebook’s headquarters after being elected in 2008—a win credited in part to Zuckerberg’s site, which his campaign had used to connect with millions of voters dubbed the “Facebook Generation” and earned him the title of the “Facebook President.” And it didn’t hurt that one of Obama’s campaign gurus was Chris Hughes, one of Zuckerberg’s roommates, who had run marketing and communications for Facebook prior to joining the Obama campaign. This all culminated with Zuckerberg adorning the cover of Time magazine in 2010 as Time Person of the Year—“For connecting more than half a billion people and mapping the social relations among them, for creating a new system of exchanging information and for changing how we live our lives.” Battling a tech colossus in California did not exactly get you favorable odds. The twins felt that the decks were stacked against them, and it was all aces for Zuckerberg.