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Did Instagram CEO Lie Under Oath?

December 17, 2012

By Cynthia Herbert :: 2:35 AM

instagram-logoThis past summer, it wasn’t just Mark Zuckerberg and Facebook who were courting photo sharing service Instagram – Twitter was in the fray as well, and Instagram CEO Kevin Systrom may have lied about that fact under oath.

In August 2012, Systrom testified at a hearing of the California Corporations Department, under oath, which was investigating if Facebook’s plans to acquire the company was in the best interest of Instagram’s investors. Facebook asked for the hearing in the hopes that it could quicken approval of the acquisition deal.

Nick Bilton at the NY Times found, by reviewing transcripts of the testimony given on that summer day, that when Systrom was asked if Instagram had received offers besides the one made by Facebook at the time of the negotiations, Systrom said, “No, we never received any offers.” Systrom explained that he had “talked to other parties, but never received any formal offers from anybody else.” That may not be true.

Bilton goes on to explain in his article, that Systrom and his Instagram co-founder, Mike Krieger, had actually held a few meetings, in March 2012 with Twitter’s executive team. Anonymous sources say that both sides had verbally agreed on a price for Instagram of $525 million, to take the form of cash and Twitter shares.

On March 20, both Systrom and Krieger turned down Twitter’s offer, and told the company that they wanted Instagram to remain independent. Three weeks later Instagram made headlines when news broke that it had agreed to be acquired by Facebook in a deal valued at $1 billion ($300 million in cash and the rest in Facebook stock).

Sources say Twitter was shocked at the news, and had been prepared to make higher offers to Instagram.

Bilton covers the rest of the story, as well as the potential fallout for Systrom and Instagram here.