Mark Cuban charged with insider trading by the SEC

Jordan Golson — Mon, 17 Nov 2008 12:50:49 -0500

Dallas Mavericks owner and dot-com billionaire Mark Cuban has been charged with insider trading by the SEC. According to the agency, Cuban sold stock in Mamma.com, Inc. in 2004 after receiving "material, non-public information." By doing so, he avoided losses of more than $750,000, the SEC alleges (read the filing).

Judging by the SEC complaint, it looks like Cuban has satisfied all three requirements for insider trading: trading while in possession of information that was "material" and "non-public" while having a "duty of confidentiality."

Of course, there are two sides to every story, and you can be sure that Cuban's high-priced legal team is working on his right now. However, the SEC has cited what it says is the entrepreneur's own language from 2004 to make its case. In the Statement of Facts of the SEC complaint, Cuban is quoted as saying "Well, now I'm screwed. I can't sell," to Mamma.com's CEO after being told of an upcoming shareholder dilution event.

If that quote is accurate, it would appear that Cuban knew better -- but went ahead and made the sale anyway. As Joe Weisenthal at Clusterstock noted, "as a general rule, if your inclination is to defend someone by asking: Would they really have been this stupid? The answer might surprise you.

Check out the full text of the complaint (PDF) -- the "statement of facts" is especially illuminating.

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Mark Cuban charged with insider trading by the SEC