Zynga Now Under Investigation For Cashing Out Before Shares Slumped

    July 27, 2012

Well, that didn’t take long. We brought you word this morning that Zynga CEO Mark Pincus and other insiders including Google cashed out on Zynga stock back in April before the company’s shares fell to the abysmal depths that they’re at today. On the suspicion that some less than honest dealings had taken place, multiple law firms are now opening investigations into the game developer.

According to Kotaku, at least five law firms are now openly investigating Zynga. They will be investigating claims that the company violated federal securities laws and breaching fiduciary duty. If they find that to be case, Zynga could face some pretty large class action lawsuits from their investors.

The current law firms that are targeting Zynga include Schubert Jonckheer & Kolbe, Newman Ferrara, Johnson & Weaver, Wohl & Fruchter, and Levi & Korsinsky. In even worse news for Zynga, some of these law firms have a lot of experience in winning class action lawsuits against video game publishers including EA and Sony.

If any of these law firms find that Zynga was up to no good, it could lead to massive class-action lawsuits from investors. That wouldn’t be good for Zynga as the company is already beaten to the lowest they have ever been.

As we saw yesterday, everybody involved in the social space saw deep cuts into their share prices. Add on to that the fact of Facebook being so close to Zynga and you have a recipe for disaster. It will be a while before either company sees their shares improve. We’ll keep watch over the coming months to see if Zynga can pull itself out of this mess.