Mark Cuban Charged With Insider Trading
The Securities and Exchange Commission charged Dallas entrepreneur Mark Cuban Monday with allegedly engaging in insider trading for selling 600,000 shares of the stock of an Internet search engine company based on non-public information. The commission’s complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that in June 2004, Mamma.com invited Cuban to participate in the stock offering after he agreed to keep the information confidential.
The complaint further alleges that Cuban knew that the offering would be conducted at a discount to the prevailing market price and that it would hurt existing shareholders. After Cuban received this information, the complaint holds that Cuban called his broker and told him to sell his stake in the company. This move enabled Cuban to avoid losses in excess of $750,000. “It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market,” said Scott Friestad, deputy director of the SEC’s enforcement division, in a statement.
-- Winter Casey
Update: Cuban responded to the claims by posting a statement on his blog. "I wish I could say more, but I will have to leave it to this, and let the judicial process do its job," he said. Follow the jump to read the statement by attorney Ralph Ferrara.
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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.”
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Ralph C. Ferrara, Esq.
Dewey & LeBoeuf LLP
1101 New York Avenue, N.W., Suite 1100
Washington, D.C. 20005
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