Mark Zuckerberg and prominent Facebook investors cashed out millions of shares before the price crashed, company filings show.
It has also come to light that a company executive issued a warning days ahead of the initial public offering that revenues of the social network were way below expectations, and the information would have almost certainly reduced the opening price of the newly floated shares.
Questions are already being raised about whether top investors reaped windfall gains with the IPO at the expense of smaller buyers.
A lawsuit against Facebook and the banks coordinating the IPO, Morgan Stanley and Goldman Sachs, was filed in New York yesterday with analysts expecting more to follow. (See: Shareholders sue Facebook, banks for hiding facts)
The matter is being looked into by both the US Securities and Exchange Commission and the Financial Industry Regulatory Authority.
The US Senate Banking Committee has also launched an inquiry and Morgan Stanley has been subpoenaed by the state of Michigan.