Federal judge warns Facebook, 'dozens' of banks will face IPO lawsuit

Mark Zuckerberg is about to have another legal battle on his hands.

U.S. District Judge Robert Sweet, presiding over the Southern District of New York based in Manhattan, issued a stern warning to the world's largest social network on Wednesday.

In a nutshell, Judge Sweet declared that Facebook, along with its CEO as well as "dozens" of banks involved in the company's tumultuous 2012 initial public offering, should expect a significant lawsuit from its own investors soon.

Why? Judge Sweet said that they have the right to pursue a suit given that Facebook "concealed material information from its IPO registration statement," as reported by Reuters.

To recall, Facebook became a public company in May 2012 under an incredible amount of scrutiny. However, the Menlo Park, Calif.-based business didn't live up to expectations, arguably becoming the poster child for consumer technology IPOs that didn't meet Wall Street expectations.

This past March, NASDAQ OMX Group, the parent company for the technology-heavy stock exchange, finally issued an apology of sorts by promising up to $62 million in cash to investors involved.

But that wasn't enough for the SEC. The situation devolved into a mess so tangled than even a financier (and former Oregon gubernatorial candidate) was arrested and charged with fraudulently convincing investors to buy non-existent pre-IPO shares of Facebook and other social media companies.

Then in June, the SEC charged the American stock exchange with a $10 million penalty over poor decisions made as well as systems set up during the initial public offering and secondary trading scheme for shares of the world's largest social network. According to the government agency itself, it was the largest penalty ever slapped against an exchange.

There have been a number of theories and arguments for what Facebook could have done better -- if anything considering the amount of pressure the social network was under.

Salesforce.com CEO Marc Benioff, who is typically a defender and an ally of Facebook CEO Mark Zuckerberg, even suggested during an interview in September 2012 that the company should have gone public on the New York Stock Exchange rather than the Nasdaq.

In reflection of that, Twitter appears to have heeded that advice and learned from Facebook's debacle, making a rather successful debut on the New York Stock Exchange in November. Nevertheless, Facebook stock has rebounded, finally climbing above the IPO price this past summer.

As of 10:30AM PT, Facebook shares were down slightly at roughly $54.66 per share.