Mark Cuban Charged with Insider Trading

[trashtalkr]

Federal regulators have accused billionaire Dallas Mavericks owner Mark Cuban of insider trading for allegedly using confidential information on a stock sale to avoid more than $750,000 in losses.

The Securities and Exchange Commission filed a civil lawsuit against Cuban on Monday in federal court in Dallas. The agency said that in June 2004, Cuban was invited to get in on the coming stock offering by Mamma.com Inc. after he agreed to keep the information private.

The SEC said Cuban knew the shares of stock, put at 600,000, would be sold below the current market price, and a few hours after receiving the information, told his broker to sell all shares in the search engine company.

The commission is seeking to impose financial penalties and confiscate gains from the trades. It is up to the U.S. Attorney in Dallas to determine whether Cuban should face criminal charges.

"As we allege in the complaint, Mamma.com entrusted Mr. Cuban with nonpublic information after he promised to keep the information confidential. Less than four hours later, Mr. Cuban betrayed that trust by placing an order to sell all of his shares," Scott W. Friestad, deputy director of the SEC's Division of Enforcement, said in a statement. "It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market."

In a statement posted on Cuban's blog, blogmaverick.com, attorney Ralph C. Ferrara said Cuban would challenge the suit.

"This matter, which has been pending before the Commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion," Ferrara said. "Mr. Cuban intends to contest the allegations and to demonstrate that the Commission's claims are infected by the misconduct of the staff of its Enforcement Division."

In the same statement, Cuban said, "I am disappointed that the Commission chose to bring this case based upon its Enforcement staff's win-at-any-cost ambitions. The staff's process was result-oriented, facts be damned. The government's claims are false and they will be proven to be so."

According to the SEC, the complaint seeks to permanently enjoin Cuban from future violations of the federal securities laws, disgorgement (with prejudgment interest), and a financial penalty.

"Insider trading cases are a high priority for the Commission," Linda Chatman Thomsen, director of the SEC's Division of Enforcement, said in the statement. "This case demonstrates yet again that the Commission will aggressively pursue illegal insider trading whenever it occurs."

Cuban's situation is drawing comparisons to Martha Stewart's involvement in insider trading in 2001. Her case moved to a criminal court when she was charged with lying to federal investigators. Stewart was convicted in March 2004 on charges of conspiracy, obstruction of justice, and two counts of making false statements and was sentenced to prison.

Mamma.com, a Canadian company, merged with Copernic Technologies in December 2005. Copernic also offers search software and online advertising services. Mamma.com now trades under Copernic's ticker, CNIC.

Source: ESPN

[AYHJA]

It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market.

I will never understand that aspect of the stock market, and thus, will probably never ever try to invest in it...Just seems like a waste of time...

[erokero85]

It kinda makes sense so people don't abuse the system to create scams I guess. But if I find out I'm gonna take a beating and lose a ton of cash, I'm sure as heck getting' outta dodge.

Either way, there goes any chance he had at owning the Cubs.

[NotFunny]

Another douche bites the dust; Instant Karma? ;)

[darklighter1]

I like Cuban. He's nuts and all but he made them one of the more viable winning franchises in the League. I think he woulda been good for the cubs. Kinda like the Steinbrenner of the National League.

Too bad about this though. It's a bad year to be Mavericky.

[trashtalkr]

I love Cuban as well. I love how animated and intense he gets at games, and I really like how he sits courtside and with the fans instead of off in a boxsuite. But if he really did benefit from insider trading, then I think the NBA should take the Mavs away from him. Someone like this does not deserve to own a team

[AYHJA]

Too bad about this though. It's a bad year to be Mavericky.

Dude, you are hilarious..!

[darklighter1]

Tee hee thanks Ube! :D