Brokerdealer.com blog update profiles online gaming company, Zynga, most popularly known for the Facebook game, Farmville, is facing a lawusit for IPO fraud. Zynga apparently defrauded its shareholders about its prospects before and after its December 2011 initial public offering. Brokerdealer’s blog update on this IPO fraud is courtesy of Reuters’ Jonathan Stempel’s article, “Zynga must face lawsuit alleging fraud tied to IPO” with an extract below. 

Ruling 13 months after dismissing an earlier version of the lawsuit, U.S. District Judge Jeffrey White in San Francisco on Wednesday said shareholders could pursue claims that Zynga concealed declining user activity, masked how changes in a Facebook Inc platform for its games would affect demand, and inflated its 2012 revenue forecast.

The lawsuit was based in part on at least a half-dozen confidential witnesses, and White said their testimony supported the claim that Zynga management intended to commit fraud.

“Plaintiff alleges that the officers at Zynga obsessively tracked bookings and game-operating metrics on an ongoing, real-time basis, with regular updates on the activity and purchases by every user of every Zynga game,” White wrote. “Confidential witnesses all corroborate that the updates on game users and spending data was readily accessible to Zynga’s management.”

White rejected a claim over Zynga’s alleged product launch delays, saying it was mere “business puffery” for the company to call its game pipeline “strong,” “robust” and “very healthy.”

To read the entire article from Reuters, click here.