Grimes. (CNN Money)

After the mostly closely-watched initial public offering in anyone's memory transformed into a spectacle marred by malfunctioning trading systems and a plummeting stock price, people were bound to ask questions.

One person, Massachusetts securities regulator William F. Galvin, asked after the role Morgan Stanley  played in managing the distribution of information in the weeks leading up to Facebook's May IPO, ultimately determining that a certain senior investment banker played an inappropriate role in Facebook's communications with the research analysts covering the company.

Mr. Galvin didn't name said banker in the consent order his office released on Monday as part of a $5 million settlement, but offered enough biographical details to identify the dealmaker as Michael Grimes, the Silicon Valley insider widely credited with winning Morgan Stanley the lead underwriter role in the Facebook offering.

That settlement led New York City Comptroller John Liu to ask another question, according to Fortune. Mr. Liu has made something of a pet issue out of strengthening policies that allow banks to claw back bonuses from employees who damage the firms' reputation or bottom line.

And indeed, 2012 has seen JPMorgan take back compensation from the traders and managers responsible for the London Whale debacle, and Morgan Stanley reclaim pay from the executive who stabbed a cab driver in the hand.

So what about Mr. Grimes? Per Fortune:

"Morgan Stanley recently enforced its clawback policy against an executive whose misconduct caused financial or reputational harm," says New York City comptroller John Lui, who was instrumental in getting Morgan Stanley to strengthen its clawback rules. "Now it's paying a hefty fine for alleged securities violations. Morgan Stanley should hold the responsible executive—and possibly his supervisors—financially accountable, or explain why not."

One explanation: Mr. Grimes landed Morgan Stanley the IPO of the century, and $5 million is chump change.

Grimes. (Noam Berger/Bloomberg/Getty)

In the aftermath of Facebook's ill-fated initial public offering, it was hard to blame Joe Facebook-fan for feeling like he'd gotten screwed. Not only had the share price failed to pop, it had plummeted, 13 percent in the first week of trading alone, not the results anyone expected before hopping on Mark Zuckerberg's supposed-gravy train.

But screwed how, exactly? After all, it wasn't just the retail investors that bit the bullet on Facebook's ill-fated initial public offering. And much of the attention in the weeks after the IPO centered on Nasdaq's technical glitches, not mom-and-pop's informational disadvantage with respect to deep-pocketed institutional investors.

Well, now there's some hard evidence pointing to the notion that the retail investor didn't get a completely fair shake: In a consent order released today, the Massachusetts state security regulator fined Morgan Stanley $5 million, after a senior investment banker at the firm advised Facebook to share certain revenue projections with research analysts—projections that never made it into Facebook's public filings.

Here's the gist of it:

On May 3, Facebook filed an amended S-1 with the Securities and Exchange Commission, in which the company identified its now-famous mobile problem: Many of its new users were accessing the social media site through mobile phones, but the company was struggling to deliver ads to said devices, leading the company to cast doubt on its own previous revenue projections.

Four days later, Facebook launched its IPO roadshow, meeting with investors in advance of its May 18 offering. According to the Massachusetts consent order, on May 7, Facebook chief financial officer David Ebersam told a senior Morgan Stanley investment banker—not identified in the legal documents, but widely believed to be Silicon Valley insider Michael Grimes—that second quarter numbers had diminished Mr. Ebersam's confidence in the company's projections.

What to do? Mr. Grimes and Mr. Ebersam got together with Facebook counsel and decided to put out another amended S-1, to ensure that all investors had equal access to the CFO's misgivings on 2012 revenue. So far, so good. Then, according to the documents, Mr. Grimes suggested that Mr. Ebersam get on the phone with the 20 research analysts covering Facebook to discuss the new filing.

And that was a problem. Mr. Ebersam declined to make the calls himself, instead delegating the responsibility to Facebook's treasurer, who isn't named in the consent order. Mr. Grimes wrote out a script, and eight minutes after Facebook filed a new S-1 was filed, the treasurer started to dial.

Here's the script, as reproduced in the consent order:

It appears that it was Mr. Grimes close involvement with the process that violated the Global Research Analyst Settlement—which requires banks to maintain so-called Chinese Walls to avoid conflicts of interest between their research and underwriting divisions—and led to the Massachusetts fine.

Indeed, Mr. Grimes seems to have been aware that he was skirting legaility. In his testimony before the Massachusetts regulator, Mr. Grimes said, "I was far down the hall so I wouldn't hear anything; I took extra precaution to do that, and sat on the floor."

But if you're investor who lost money on the Facebook IPO, more material to your concerns might be this: In the script Mr. Grimes authored, the banker instructed the Facebook treasurer to say "we believe we are going to come in the lower end of the $1.1. to $1.2 bn range for Q2 based upon the trends we described in the foreclosure."

That was vital information that never made it into the public disclosure, and while you might ask over how much the information might have changed the average retail investors behavior, Massachusetts Secretary of State William F. Galvin isn't quibbling:

“The improper influence of Morgan Stanley’s investment bankers over research analysts is yet another example of an unlevel playing field, where Main Street investors were put at a significant disadvantage to Wall Street,” he said a statement.

Cause you're growns-up and you're growns-up and you're growns-up!

It's been less than a week since Facebook debuted on the public markets. But each day, it seems, unearths new contenders for another round of the Facebook IPO Blame Game. (Play along at home!)

While Congress plans its investigation into underwriters like Morgan Stanley, Dan Primack dropped an interesting perspective in his Term Sheet newsletter: Blame the "adults."

Institutional investors also didn't want Zuckerberg to take Facebook public unless he added some big-name "adult" supervision. After all, what does a 20-something know about running a multi-billion dollar public corporation? Just imagine the costly mistakes he would make.

Hence hiring seasoned executives like Sheryl Sandberg as COO and David Ebersman as CFO. But the hires meant to boost Facebook's maturity level with the public markets may have backfired.

Mr. Primack, for example, has some choice words regarding Ms. Sandberg's decision to recuse herself from the underwriter selection process based on her previous relationships at Google.

Pardon me, but wouldn't such relationships actually have been important? Not to get bankers to take on Facebook as a client -- everyone wanted them -- but because she might have a better sense of who would, and wouldn't, be the best fit? And, once Facebook did pick her pal Michael Grimes over at Morgan Stanley, wouldn't it have been good to have a third opinion in the room -- particularly one so close to both key players?

Mr. Grimes, if you'll recall, helped Morgan Stanley lock down deals for the LinkedIn, Pandora, Zynga, and Groupon IPOs, which Henry Blodget credits to his "dork" cred and love of video games.

As the Wall Street Journal reports, Mr. Grimes was the Facebook CFO's "main confidant."

"This IPO was an Ebersman and Grimes show," said one of the people familiar with the matter. "They were joined at the hip."

It seems they both saw eye-to-eye on decisions that may have sealed Mr. Ebsersman's fate as "Facebook fall guy."

The Journal's sources say it was Mr. Ebersman, backed by Morgan Stanley, who decided--less than three days before the IPO--to boost the number of shares Facebook would offer by 25 percent.

His main adviser at lead underwriter Morgan Stanley assured him there was plenty of demand, they said.

That decision by the 41-year-old Facebook executive may have doomed any real chance the social-networking company had that its stock would jump on its first day of trading—a hallmark of successful IPOs.

Now, just because an IPO pop makes a big noise doesn't necessarily mean its a hallmark of success. But Mr. Primack notes, Mr. Ebsersman may also have been guilty of selective disclosure:

Then there is Ebersman, who oversees a financial operation that allegedly warned underwriter analysts -- but not others -- to cut Q2 guidance estimates (even if all it really said was "please start paying attention to what we said about mobile"). If true, what he (and MS) did may actually have violated securities regulations -- and also means he shouldn't be too quick to count his unvested shares.

While potential shareholders were fretting about Mark Zuckerberg's controlling share of Facebook, who was watching the grown-ups table?

Unfortunately, the story is a write-around, which means Mr. Blodget didn't get access to Mr. Zuckerberg--natural during the quiet period. And if you've read David Kirkpatrick's The Facebook Effect, seen Zuck sweat on stage with Kara Swisher, perused Ken Auletta's excellent profile of Sheryl Sandberg, or can name the founders of Andreessen Horowitz, there isn't much news to report.

We did, however, enjoy Mr. Blodget's opaque nod to that time he got banned for life from the securities industry for pumping up stocks in public, while he was bad-mouthing them in private: 

"Many promising tech companies place too much emphasis too soon on the business rather than the product. They worry too much about “making money.” This sounds nuts—aren’t companies supposed to make money?—and it sounds especially nuts in the wake of the dot-com bust. But that crash was a product of investors’ and analysts’ overexuberance (sorry!), not evidence of a fundamental flaw in the tech industry’s start-up ecosystem."

It would be easier to forgive Mr. Blodget if he spent some time in the magazine talking about why he thinks Facebook's IPO will be "enormous Muppet bait," as he tweeted last week, rather than taking Zuck at his word in an SEC filing when he wrote, "We don’t build services to make money; we make money to build better services." As documents have shown, Facebook Timeline, for example, is a better service . . . but for brands.

Update: Perhaps Mr. Blodget has some insider intel on Mr. Zuckerberg's motivations that we don't. New York magazine neglects to mention it, but Facebook director Marc Andreessen, whose venture capital firm owns 6.6 million Facebook shares according to the latest S-1 filing, has also participated in Business Insider's last three investment rounds. Allen & Company, one of the investment firms underwriting Facebook's IPO, has also repeatedly invested in Business Insider, the company where Mr. Blodget serves as cofounder, CEO, and editor-in-chief. Andreeseen Horowitz, who Mr. Blodget eagerly credits in New York mag for ushering in an era of "founder CEOs," also made $78 million from Facebook's billion purchase of Instagram, a decision Mr. Blodget praises effusively in the magazine. 

Update, 5.10 p.m.: Lauren Starke, New York magazine's communication manager respond to Betabeat's inquiry about disclosures by email:

"Henry Blodget is transparent about his associations with the firms and companies he writes about on Business Insider, and has also openly questioned whether Facebook shares will be worth what other valuations have priced them at. That said, disclosure is always a good thing, and our article should have noted that Marc Andreessen is an investor in Business Insider; the online version of the story will be updated accordingly."

Where Mr. Blodget, a former star analyst for Merrill Lynch before Eliot Spitzer intervened, really shines is in a handy table about the intersection between tech and Wall Street called "Silicon Valley Is Allergic to Slicked-Back Hair." According to Mr. Blodget:

Goldman Sachs needs a new barber.

One of Goldman Sachs’ main Internet bankers in Silicon Valley is named Scott Stanford. And one problem with Stanford, says a Valley executive, is that “his UI,” or user interface, is “off-putting.” Pressed for details, the executive mentioned Stanford’s “slicked-back hair.”

It pays to be a banker in the street, but a geek in the head, at least for Morgan Stanley star Michael Grimes.

He’s described as “incredibly hardworking” and “honest, direct, and smart” but also “weird” (one V.C. mentions Grimes’s alleged habit of playing video games until 5 a.m.) and “a dork” (a Valley executive tells of the time Grimes received a call from a client in the middle of a conference room in which lawyers, bankers, and accountants were working around a table drafting a financing document; instead of excusing himself, Grimes slid under the table and continued the conversation, murmuring away as the drafting session ostensibly continued above).

Andrew Ross Sorkin's source on Goldman's private-placement memo, may have been coming from inside the industry:

There’s a tantalizing conspiracy theory to Goldman’s Facebook debacle. Before Facebook kicked off the Goldman transaction, the story goes, CFO David Ebersman called Morgan Stanley and JPMorgan to give them the heads-up. Knowing the headaches it could cause Goldman, one of these bankers called the Times’ Sorkin and tipped him off. Goldman likes this version. The idea that it would be so ham-fisted as to blow up its own deal is mortifying.

We'd also recommend taking a look at the ever-incisive Paul Ford, who makes an appearance in New York mag's Facebook cover package as well. Mr. Ford argues that Facebook hasn't peaked because of its OAuth service, which lets you log in to websites and apps. Having hundreds of millions of people use your product as an identity layer has a way of giving it legs. See, now that is brillz.