MySpace founder alleges fraud in sale to News Corp

Abdul-Salaam Masheer

MySpace founder Brad Greenspan alleged on Thursday that the 2005 sale of the popular social networking site to News Corp was one of the “largest merger and acquisition scandals in US history”. Greenspan who made $47 million when he walked out of MySpace said that federal investigators should examine the deal.

“For the first time the public can read what took place behind the scenes and how shareholders were blatantly misled into voting for a quick and unfair sale to News Corp,” he said in a statement on freemyspace.com. Greenspan says that the shareholders were deceived into approving a transaction despite common knowledge that the company was undervalued.

As proof Greenspan offered documents that show MySpace revenue was growing at more than 1,200 percent a year. News Corp indulged in self-dealing, insider trading and options acceleration, besides participating in an unfair purchase process, he added.

Greenspan wants the deal to be investigated by Justice Department and the Securities and Exchange Commission. “It is time everyone knew the truth about the ‘hijacking’ of MySpace and the individuals responsible for this eye popping theft,” he alleged.

News Corp has rubbished the claims made by Greenspan. A company spokesperson said his rants were “simply a case of sour grapes making for loud complaints,” Reuters reported. Julie Henderson, a spokeswoman for Fox Interactive Media said that many analysts had felt News Corp was taking a risk when it first brought MySpace.

“We’ve strategically built this business since the acquisition and are just now beginning to realize real financial value. This is simply a case of sour grapes making for loud complaints,” she added. Greenspan has filed a suit against News Corp as well as VantagePoint Venture Partners, a venture capital firm that played a key role in the $580 million deal.