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Mark Cuban Charged With Insider Trading

Posted by CmdrTaco on from the that's-a-way-to-make-bank dept.

geekboy_x writes "The SEC today charged Mark Cuban with insider trading violations, alleging that he divested himself of stock in mamma.com before the stock was diluted via a public offering." Something tells me that the billionaire blogger won't be talking about this one publicly any time soon.

12 of 176 comments (clear)

  1. Wrong, He Has a Blog Post On It by eldavojohn · · Score: 4, Informative

    Something tells me that the billionaire blogger won't be talking about this one publicly any time soon.

    Are you crazy? Do you know how many page hits that would generate?! You don't know Mark Cuban. Of course, from his blog a few hours ago:

    "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."

    I'm not a lawyer. As for the case, I think this crap happens more often than you would like to think--the rich get richer, the poor get poorer. The fact that this occurred in June of '04 and he's being charged for it now implies that either it takes that long to build up evidence for a case or you don't hear about this until someone slips up. Also, I don't recall hearing the SEC drop charges or lose these cases very often so I'm pretty sure this guy is boned.

    --
    My work here is dung.
    1. Re:Wrong, He Has a Blog Post On It by Anonymous Coward · · Score: 1, Informative

      Funny how the other thing that happened recently was that Cuban just launched a website, BailoutSleuth [bailoutsleuth.com] looking into and organizing against the Bush/Paulson Wall Street bailout.

      How many more times are you going to post your crackpot theories today, Doc?

    2. Re:Wrong, He Has a Blog Post On It by sunking2 · · Score: 2, Informative

      If he is guilty, than coicidental doesn't really matter. What matters is that he is being prosecuted. From the little I've read he seems pretty guilty. The story basically goes: He heard from momma.com that would sink their stock. He immediately sells. The next day momma.com makes an official announces, stock tanks. The end result is he saved himself like $600k in losses. Assuming this happened, he is guilty and whether there is another agenda behind it is irrevelent.

    3. Re:Wrong, He Has a Blog Post On It by erikina · · Score: 4, Informative

      As for the case, I think this crap happens more often than you would like to think--the rich get richer, the poor get poorer. The fact that this occurred in June of '04 and he's being charged for it now implies that either it takes that long to build up evidence for a case or you don't hear about this until someone slips up.

      As a hobbiest stock trader, I can tell you with confidence that inside trading happens a hell of a lot. Theres billions of dollars to be made. In fact, it happens so much - that there are many technical-trading techniques used to "follow the insiders". So every so often they find an inside trader, chuck him in jail and try make everyone happy. I'd much prefer if the government just got it's nose out of the market. The only thing insider traders do is lead to a more accurate market..

    4. Re:Wrong, He Has a Blog Post On It by KillerBob · · Score: 4, Informative

      The company I work for encourages me to buy its shares. If that is not insider trading I don't know what is.

      That's not insider trading. It may or may not even be stock options. The company I work for (one of the top 3 computer companies in the world) also encourages us to buy their stock, and offers stock options to its employees. They also require we take annual training on business ethics, and that we understand exactly what constitutes insider trading. There's even a question on the final exam of said training dealing specifically with when it would be unethical to purchase stock.

      Knowing the general scuttlebutt around the company for how we're doing doesn't give me inside information. Pretty much the whole world knows which markets we're leading, and wich markets we're behind in. If somebody on the front lines is buying stock, they probably don't know anything more about the company than the public at large. We have another category entirely of employees, however... people who are windowed. Those people are given a window in which they are allowed to buy/sell company stock, and periods when they are not allowed to buy.

      An example of when a windowed employee would not be allowed to buy would be, say, after our sales figures for the last quarter have been tallied, but before they have been published. People in the upper echelons of the company will know this information, and would be able to predict how their announcement will affect our stock market. With this in mind, they can react accordingly. This, in turn, would allow them to buy a bunch of stock before a sudden spike, or dump a bunch of stock before it falls. That is insider trading.

      Insider trading is illegal, because it gives those people an unfair advantage over the rest of the world. That's why we have windowed employees... if you're in a position where insider trading is possible, you're told when not to buy/sell stock so that you can't be accused of it.

      --
      If you believe everything you read, you'd better not read. - Japanese proverb
  2. Re:why should we care? by fprintf · · Score: 2, Informative

    I've never been able to figure it out, and in fact didn't know why he was famous until you mentioned broadcast.com (a place I have never been). Billions for that?

    I only saw his reality show, and learned from that show that he owns a basketball team. Otherwise, you are right. Why should we care? He made billions, meanwhile his company (I believe acquired by Yahoo! since broadcast.com redirects there) no longer exists and the parent company is in financial trouble itself. Got out at the right time is an understatement!

    --
    This post brought to you by your friendly neighborhood MBA.
  3. Re:why should we care? by 0100010001010011 · · Score: 2, Informative

    In an open letter to Internet service providers published earlier this week, billionaire entrepreneur Mark Cuban calls for telecoms to put an end to peer-to-peer (P2P) file-sharing. Cuban expresses concerns that P2P "freeloaders" are clogging the tubes with commercial content. His letter doesn't focus on piracy, however, and instead primarily attacks companies that use P2P for legitimate commercial applications.

  4. Re:why should we care? by netsavior · · Score: 2, Informative

    let me rephrase your comment to explain:

    Why would a bunch of nerds be interested in a guy that made a BILLION DOLLARS doing something nerdy?

  5. Re:Retaliation for Cuban's Anti-Bailout Website? by MindlessAutomata · · Score: 1, Informative

    We're not really socialist yet. Obama, and more specifically, our next Congress, will lead us down that road. We might not arrive at the destination but we'll wander down that path a bit. Who knows what happens then?

  6. Summary is incorrect by paulthomas · · Score: 4, Informative

    Mamma.com took a private investment at a discount (a PIPE). This is a sign of weakness, and the announcement sent the shares lower. The SEC alleges that Mr. Cuban sold his shares with insider knowledge of the PIPE, liquidating his stake before it got battered the next day.

    WSJ article (report updated since I saw it earlier; it now erroneously says it was an investment in a private company).

  7. No Jail Time by Nixoloco · · Score: 2, Informative


    According to the complaint filed by the SEC, they are not seeking any jail time.

    They are seeking judgement:
    a. enjoining Cuban from engaging in future violations of the antifraud provisions of the federal securities law.
    b. ordering Cuban to disgorge, with prejudgement interest, the losses avoided as a result of the actions described
    c. ordering Cuban to pay a civil money penalty to pursuaint to Section 21A.... blah blah

    But.. no jail time. Martha Stewart received jail time because she was convicted of obstruction of justice / lying to investigators. Not that I don't think jail time is warranted personally..

  8. More information here by weiserfireman · · Score: 2, Informative

    http://www.businessassociationsblog.com/lawandbusiness/comments/the_insider_trading_charges_against_mark_cuban/

    This was written by a Law Professor. Basically it boils down to the SEC has to really stretch current law to cover this situation.

    It appears the CEO of Mamma.com knew that several of their original investors, specifically Mark Cuban, would be upset by the release of more stock, diluting his original investment. The CEO might have told Mark about the investment in an attempt to keep him from being able to sell his shares before the announcement.

    Mark was a minor stockholder (6.3%) and didn't meet any of the other legal standards (fiduciary responsibility to the company) to be considered a traditional insider.

    So here is question. If you are a stockholder in a company, can the SEC consider you an insider under the law if an insider calls you and asks you to keep a secret? Under traditional insider rules, the CEO of the company is the person who violated the law by telling Mark about the upcoming announcement.

    not a lawyer, but find legal topics fascinating