SEC Charges Mark Cuban With Insider Trading

[ihavebeenseen]

http://online.wsj.com/article/SB122693827604333637.html



The Securities and Exchange Commission filed insider trading charges against Mark Cuban, the outspoken owner of the Dallas Mavericks, for allegedly dumping shares in Mamma.com upon learning it was raising money in a private offering (full text of complaint).

The SEC alleges in a civil action that Mr. Cuban sold his entire 6% ownership stake on June 28, 2004, after learning that Mamma.com was raising money through a private investment in a public entity, or PIPE. The next day, on June 29, the company announced the PIPE financing and shares of the company dropped by more than 10%. By selling his stake, the SEC alleges, Mr. Cuban avoided more than $750,000 in losses.

In a PIPE transaction new shares are issued at a discount to the current trading price. An announcement of a PIPE transaction is often followed by a drop in the stock price as shareholders anticipate their stake will be diluted.


Suppose the Mavericks will be up for sale now.

[concretist]

More proof that not every rich person is smart enough to stay that way.

[eddieg1]

http://blogmaverick.com/

I wish I could say more, but I will have to leave it to this, and let the judicial process do its job.
November 17, 2008
RE: SEC Civil Action in the United States District

for the Northern District of Texas, Dallas Division

Mark Cuban today responded to a civil complaint filed by the United States Securities and Exchange Commission in the United States District for the Northern District of Texas, Dallas Division. In its complaint, the Commission charges that Mr. Cuban engaged in violations of the federal securities laws in connection with transactions in the securities of Mamma.com Inc.

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. 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.

Mr. Cuban stated, “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.”

[aygriffith]

Suppose the Mavericks will be up for sale now.

Doubt it, have you heard how much he was going to pay to buy the Cubs? He was the highest bidder at over 1.4 billion I believe. Of course they wouldn't sell it too him because Mark Cuban is such a bad boy for life... If he's the worst owner in pro-sports we've quickly forgot about many past owners of all different sports franchises.

[hamiltonpl]

This is a civil lawsuit by the SEC, not a criminal one. Plus, he only made 750k off the sale. That's chump change for someone worth $4.1 billion.

[mjblazin]

My impression of him is that he's an intelligent and reckless person that makes rash decisions and hates to lose anything. He needs a filter to screen out the dumber actions such as this episode. As insider trading cases go, this one seems particularly blatant.

Some people are that way. It's no different than the recent story of the Mississippi trial lawyer convicted of attempted bribery of of judge. The amounts in the case, a few million dollars not shared with partners in a case, were piddling to the 100's of millions in fees that he amassed. But he refused to accept losing even that amount, made some rash decisions, and turned an insignificant civil case into a very serious criminal case.

Michael Corleone had buffers. He also needs one.

[eddieg1]

This is a civil lawsuit by the SEC, not a criminal one. Plus, he only made 750k off the sale. That's chump change for someone worth $4.1 billion.


As it stands, the civil suit merely seeks financial penalties for the alleged wrong doing. But as Martha Stewart learned the hard way, criminal charges can be tacked on if investigators believe they have been lied to.

Which means Cuban will have to tread carefully around the question of why he sold all his shares in what the SEC alleges was a four-hour window after he learned of the impending PIPE and subsequent share dilution and price drop.

Stewart sold her ImClone stock the night before bad news was made public but it was when her explanation of the sale stretched credulity that she was charged with obstruction of justice for which she was convicted and served time for.

[RobertB]

The penalty I heard was $3 million. Hasn't Cuban paid more than that to the NBA for technical fouls?