Mark Cuban Charged With Insider Trading

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.

Comments

Wrong, He Has a Blog Post On It

[eldavojohn]

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.

Re:Wrong, He Has a Blog Post On It

[erikina]

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..

Re:Wrong, He Has a Blog Post On It

[KillerBob]

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.

Summary is incorrect

[paulthomas]

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).