24/7 Wall St.

A 1994 Oregon Republican gubernatorial candidate, Craig Berkman, was charged with fraud today by the U.S. Securities and Exchange Commission (SEC) for a “Ponzi-like scheme” around last year’s initial public offering of stock in Facebook Inc. (NASDAQ: FB). An associate of Berkman’s was also charged with aiding and abetting in the violations.

Berkman, who now lives in Florida, raised $13.2 million from 120 investors by selling shares in limited liability companies he owned that he claimed would either acquire pre-IPO shares of social media companies, acquire pre-IPO shares of Facebook, or acquire a company that already owned pre-IPO shares of Facebook.

Berkman did invest about $600,000 in an unrelated fund that had acquired pre-IPO Facebook stock, but Berkman’s investment did not provide him or any of his company’s with ownership of those shares. The rest of the cash went to pay off an earlier fine, pay off early investors in the Facebook IPO scheme, and for his own personal use.

This is such a run-of-the-mill scheme that it seems incredible that anyone would fall for it. Facebook’s insistence on a $100 billion IPO valuation — which lasted for about one day — was a far more inventive way of separating investors from their money.