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

[wtansill]

Maybe he can get Martha Stewart's old cell. Should be a nice homey place...

Re:Wrong, He Has a Blog Post On It

[Anonymous Coward]

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?

Re:Wrong, He Has a Blog Post On It

[sunking2]

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.

Re:Wrong, He Has a Blog Post On It

[ArcherB]

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.

Whatever happened happened in 2004, but he's being charged only in the last few weeks Bush can direct the SEC.

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

BTW, in America people are presumed innocent until proven guilty, especially when Bush has a political crusade at stake. Even if Cuban is guilty, it's pretty "coincidental" timing to start prosecuting him.

No, if that were the case, they would have gone after Cuban after he funded Redacted, or any of the other stupid stuff Cuban is guilty of.

Re:Wrong, He Has a Blog Post On It

[larry bagina]

"Insider trading" can be very vauge and edge cases aren't clearly defined by statute or case law. Martha Stewart wasn't convicted of insider trading, she was convicted for obstruction of justice during the investigation (which might not have madei t to trial). If he shuts up, doesn't lie, and doesn't try to destroy evidence, he'll find it a lot easier to stay out of jail.

Re:Wrong, He Has a Blog Post On It

[russotto]

Maybe he can get Martha Stewart's old cell. Should be a nice homey place...

Don't think they're going to put Cuban in a women's prison. Anyway, Martha Stewart was not convicted of insider trading. She was convicted of lying to investigators.

If Cuban's smart (and I suspect he likes to run his mouth too much), the only thing he's said to investigators is "My lawyer is _____, anything you want from me, talk to him".

Re:Wrong, He Has a Blog Post On It

[NothingMore]

Id say its only coincidental timing since the SEC took about the same amount of time to bring charges against Martha Stewart (her insider trade happened in 2001 and she wasn't put on trial until 2004). Whats REALLY coincidental is that he allegedly committed this crime one month before Stewart was sentenced to go to jail for her insider trading charge. Why he would make an inside trade when another high profile celebrity was taking heat for insider trading is kinda mind blowing.

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

[Reality Master 101]

BTW, in America people are presumed innocent until proven guilty, especially when Bush has a political crusade at stake.

I like Mark Cuban, and I can totally believe the Bush administration is trumping up charges against him. That said, your quote is one of my pet peeves, and is DEAD WRONG.

In America, people are presumed innocent until proven guilty IN A COURT OF LAW. The public at large is perfectly within its rights to judge anyone anyway it wants to. For example, O.J. Simpson was found not guilty in his first trial, yet I have no doubt he performed the crime.

All too often people in power and/or defense attorneys try and manipulate the public with the "innocent until proven guilty" junk. "Don't rush to judgment on my client just because he was seen with a smoking gun in his hand, remember, we're all innocent until proven guilty!" No, I'm under no obligation to judge people based on courtroom rules used to "prove" guilt. I can judge people based on whatever criteria seems reasonable to me.

Re:Wrong, He Has a Blog Post On It

[Doc Ruby]

Even if he's guilty, of course selective prosecution matters. It doesn't change whether he's guilty, but it does show how seriously not credible is the agency that's selectively prosecuting him. Even if he is actually guilty, a verdict from such a corrupt agency is hard to take as proof that he's guilty.

FWIW, what little you heard is just the initial press response repeating the SEC's charges. If that were enough to decide guilt, Bush would have had all 60M people who vote Democratic behind bars over the past 8 years. In fact, we might even have, say, invaded Iraq amidst fanfare and WMD hysteria if we all just believed whatever the press initially reported when a Bush agency told us one of its enemies was guilty of something.

Re:Wrong, He Has a Blog Post On It

[techno-vampire]

She was convicted of lying to investigators.

Yes. She was convicted of lying to investigators when she wasn't under oath and hadn't been warned that what she said might be used against her. Not only that, what she lied about must not have been a crime because she was never charged with anything else.

Now we know: never talk to the feds unless your lawyer's present, even if you don't think you've done anything against the law.

Re:Wrong, He Has a Blog Post On It

[billcopc]

It's not mind blowing, it's business as usual.

Just because one person gets caught, doesn't mean the other half-million stock scammers are going to turn themselves in.

Re:Wrong, He Has a Blog Post On It

[DimmO]

Are you crazy? Do you know how many page hits that would generate?!

Well, none from here since no one RsTFA.

Re:Wrong, He Has a Blog Post On It

[moxley]

Nice catch. I agree with you, it IS coincedental, to say the least....

Unfortunately many people in America still think things are the way they are on TV, they way we all like to think America is.

In truth, when you do something public that purports to shine light into the incredible amount of malfeasance, scandal, and many times outright criminal or unconstitutional activity of the federal government don't think that they wont look for a way to "fuck up your game."

This is just one facet of what the justice system has become in America - it is abused by those who control it and abusive towards their enemies and the masses in general.

I'm not a big Mark Cuban fan, but I don't dislike him either - I haven't had a chance to really examine bailoutsleuth in detail, but I have to say that at least he has done soemthing rather than just complain about it - this whole financial situation we're in is total bullshit and is no accident, nor is the way that much of this bailout money is being used (EG for bonuses and other such crap). Every day we get deeper into fascism (and BTW, I am not one of those people crying "fascism, fascism" at every perceived injustice; I am talking about the definition of that word - and that is what America is becoming.

  People are supposed to be presumed innocent - but have you looked at the way federal prosecutors behave? If you're facing federal charges you can be pretty fucked, it's a plea bargain game because the penalties are so severe that it's basically gambling with your life and livlihood - and the prosecutors and judges seem to reap political dividends from this system because it raises their conviction and sentencing stats among other things; and once something like this has been in the press you're pretty fucked in the court of public opinion too.

So yes, I think he stepped on some toes trying to show people what's really going on "behind the curtain" and stop it; publically.... so the powers that be decided to do a little digging or pulled out a file that was ready for the occasion, and viola, bend over Mark Cuban.

Re:Wrong, He Has a Blog Post On It

[MichaelSmith]

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.

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

Re:Wrong, He Has a Blog Post On It

[rtfa-troll]

The stock market was designed to allow more or less normal (though mostly rich) people invest for the future in companies without having to take full responsibility for that and risk their freedom in something that they don't understand. The trade off is that they have to have limited knowledge about and control of the company (because if they do understand and control the company they could use it as cover for doing illegal things without responsibility).

Insider trading completely breaks those assumptions by conning those normal people who think they have a fair way of investing. Technical traders are already pretty close to evil (they profit only from other investor's inability to get the information they have and move as fast as they do). Insider traders are directly stealing grandma's pension.

The fact they steal from people on a grand scale shouldn't make the penalty any lighter. The idea that a country can send a mother to jail for life for stealing a pizza to feed her kids whilst leaving unpunished those that steal pizza from millions is exactly the stupidity that got the world economy into it's current mess.

Re:Wrong, He Has a Blog Post On It

[ArcherB]

But since you are evidently guilty of collecting Bill O'Reilly talking points to defend Bush attacking the guy exposing that ripoff, I'm going to take your post as confirmation that your wingnut army is going after Cuban with the last power it has left, since America just fired it for its decade of crimes.

And the fact that you accuse me of "collecting Bill O'Reilly talking points" tells me you a far left-winger suffering from severe Bush/FoxNews Derangement Syndrome. My disdain for Cuban comes from what he said about The San Antonio River Walk, not anything I saw on O'Reilly. You should get to know someone before you start making broad assumptions about them. Otherwise, you are no different than those that call people Racist because the voted against Obama or traitor because they oppose the war. Yep! That's you!

I was pointing out that Cuban has hard time keeping his mouth shut and is well known for doing stuff that make other people stare and say "WTF?" The guy is a loose cannon. He evidently has the smarts to make the money, but not enough common sense to know when to STFU.

Personally, I don't understand why someone with more money than they could possibly spend would be so stupid as to risk losing everything and end up in jail trying to make more.

Re:Wrong, He Has a Blog Post On It

[Doc Ruby]

That legal principle means that no one can accurately judge someone guilty until they're proven guilty. You've got a right to be wrong, and prejudge someone - you might even guess right - even though courts don't have that right to be wrong. But if you judge people guilty without their going through an evidence and argument process, you're probably going to be wrong.

You're an "Obama Republican". I note that Republicans like to think that government is fundamentally an arbitrary set of rules that apply only to government. In fact America's government is built on some "self evident truths" that are universal, not just parochial governmental procedures. Even according to science, a statement isn't accepted as fact until it's been rigorously attempted to be disproven and failed. So in reality, "innocent until proven guilty" is realistic, except in a very few of the most grossly self evident cases. Cuban's is not one of them, as he hasn't gone through any of the evidence and argument process, and all we've got to go on is the initial press reaction to the SEC filing charges against a celebrity.

I further note that as I looked down to submit this comment, I noticed the quote at the bottom of the Slashdot page reads:

"The fundamental principle of science, the definition almost, is this: the sole test of the validity of any idea is experiment." -- Richard P. Feynman

Re:Wrong, He Has a Blog Post On It

[SomeJoel]

If the advice is ALWAYS "buy", then it is not insider trading. You aren't making your decisions based on any inside knowledge - in fact, you aren't making decisions at all, since you are always buying.

Re:Wrong, He Has a Blog Post On It

[Doc Ruby]

You just linked to O'Reilly's talking points about Mark Cuban, you insane Republican liar. The list of what you personally don't understand is bigger than Cuban's fortune.

Re:Wrong, He Has a Blog Post On It

[erikina]

That's crap on so many levels. But first, let's get you off your moral high-horse. Let's say you have a $100k worth of Intel stock (from super, or w/e retirement plan you have in your area). So anyway, you always Intel was a pretty solid stock, and got along with some Intel people.

Now let's say you're knocking back a few beers with your Intel buddy, and he tells you the i7 CPUs are failing en masse, the management is crumbling and AMD is poised to deliver a fatal blow. So in short, you are now in possession of insider information. So the question is, would you sell your stock or wait till you lose it?

Secondly, there's no stealing. You agreed, I agreed. We might have different information, but that's hardly a secret. And the person who is "more correct" will drive the market to correct itself. (See prediction markets).

A technical trading is evil? rofl I'm not even going to bother..

Re:Wrong, He Has a Blog Post On It

[Reality Master 101]

You've got a right to be wrong, and prejudge someone - you might even guess right - even though courts don't have that right to be wrong. But if you judge people guilty without their going through an evidence and argument process, you're probably going to be wrong.

"Prejudging" has nothing to do with it. Courts of law are heavily weighted toward finding not guilt verdicts, because we've decided that "better a guilty man go free than an innocent man go to jail." The tragedy of a wrong guilty verdict is such that we don't want to risk it.

Courts are NOT about finding the truth! The "truth" may be that Suspect A is absolutely guilty of murder and we have video to prove it -- but if the video was ruled inadmissible, then the murderer may go free, even though everyone involved with the case knows that the truth is that he's guilty. The United States has determined that we'd rather let a guilty man go free than use contaminated evidence.

I, however, am free to use whatever evidence I want to determine guilt -- because all I'm interested in is the truth. That's not the same metric as a court of law. So it's perfectly reasonable to hold a personal standard that's not the same as a court of law.

Re:Wrong, He Has a Blog Post On It

[zolltron]

The only thing insider traders do is lead to a more accurate market.

No, I think it will lead to no market at all. If I know that someone else can make use of insider information against me, then I have an incentive to put my money somewhere else.

In this case think about those people who bought stock from Cubin. If they had known that Cubin knew more than them, they would probably have opted not to buy in the first place.

Re:Wrong, He Has a Blog Post On It

[pnumoman]

You may be trying to be snide, but yes, you really should always have a lawyer present when that kind of heat is being applied to you. Federal investigators don't have to recite Miranda unless they're taking you under custody. (and depending on what kind of investigator they are, they might not have the authority to take you under custody.) And lying to a federal investigator is a serious no-no regardless of what the circumstances are. See 18 USC 1001. Simply put, don't lie when the feds come asking questions. It's a crime, plain and simple. Or, like parent said, don't say anything unless you have a lawyer present. Oh, and IANAL...yet.

Re:Wrong, He Has a Blog Post On It

[operagost]

Arstechnica is now a shill for Fox News! You heard it from DocRuby first!

Re:Wrong, He Has a Blog Post On It

[erikina]

No, I think it will lead to no market at all.

Yeah, just like markets that allow it. Including real estate and prediction markets.

If I know that someone else can make use of insider information against me, then I have an incentive to put my money somewhere else.

Fine, maybe you and a few other small players will feel too intimidated and not enter the market. (Even though inside trading already occurs, you just need to be sneaky). But that really doesn't change a thing or my point :)

In this case think about those people who bought stock from Cubin. If they had known that Cubin knew more than them, they would probably have opted not to buy in the first place.

Exactly. They didn't know more than him. The news was bad, so he used his knowledge to sell. Influx of selling caused the stock value to go down before the news. If that's not a more accurate and responsive market, then I don't know what is.

Re:Wrong, He Has a Blog Post On It

[mr_lizard13]

Holy shit, the i7 CPUs are failing en masse??!

They've only just come out!

Re:Wrong, He Has a Blog Post On It

[MarkRose]

the rich get richer, the poor get poorer

That's because the rich invest the time to learn how to generate wealth and then do it. It's a skill almost anyone can learn. Those who don't simply have other priorities. We still live in a mostly free society in western world. It's one thing to be starving on the streets, but anyone who has enough money to have a tv and the time to watch it has all the resources they need to become wealthy.

The other reason why the poor get poorer is because of fiat currency and fractional reserve banking. This allows for rampant inflation. Inflation is a tax on the middle and lower class. Everytime banks or governments borrow money from a central bank (e.g. the Federal Reserve), new money is added to the money supply, created out of nothing. As the holders of these loans spend the money, they get its full buying power, while the buying power of dollars everyone else holds gets diluted, essentially robbing the savings of the middle class.

Insider trading is really a minor issue. If the other stockholders truly feel they lost value, they should be the ones suing.

Re:Wrong, He Has a Blog Post On It

[CodeBuster]

The smart investor has contingency orders or even chains of orders in place to be executed immediately when triggered by certain events (such as a precipitous and sudden drop in price below a certain threshold). Although this will not completely protect an investment which is falling like a rock from losing value it does provide some measure of protection against bad news without being insider trading. It is also possible to purchase derivatives which insure against a loss in exchange for regular premiums so that the total amount of risk that one wishes to take in a given investment can be very finely controlled. These types of measure foreclose any possibility of insider trading indictment because even if you hear about insider news and your trades are executed soon afterward in response to events you can successfully defend the sales by arguing (correctly) that you had placed orders contingent upon those events long before you became privy to the insider information (so long as you don't change them before the public at large becomes privy to the good or bad news).

Re:Wrong, He Has a Blog Post On It

[MichaelSmith]

I would only buy shares in my employer if I knew they were about to win a big contract, or some other advantage.

Re:Wrong, He Has a Blog Post On It

[nomadic]

I concur with everything you say. Always be polite to the cops or federal agents no matter how obnoxious they are, but demand to see a lawyer and then keep your mouth shut. And IAAL so there's instant credibility!

Now everyone who read this send me $200 for legal services rendered.

Re:Wrong, He Has a Blog Post On It

[CodeBuster]

Inflation is a tax [lewrockwell.com] on the middle and lower class.

Bingo! That is exactly correct and beginning in the mid 1960s and continuing on through the early to mid 1980s that was a very serious tax indeed which was compounded and made even worse for the middle class by the relative stagnation of wages as compared to that inflation from about 1978 onwards. This is one of the main reasons why the children of the boomers (generation X) and their children (generation Y) are having a harder time achieving the levels of prosperity that the boomers did when they were that age. The boomers, who are strong politically, will attempt to prop up high housing prices by whatever means necessary, including wholesale government intervention, to protect their "golden years" in spite of the increasing difficulties experienced by their children who are burdened with debts or living at a lower standard than their parents did. The housing correction, to bring prices back in line with what wages dictate that people are able to afford, is a necessary step in restoring the prosperity of our nation, but the boomers, as usual, will probably force the government to intervene to protect their retirement self interest. The boomers will probably be remembered as the first generation in American history to leave the country to their children in worse shape than it was bequeathed to them by their parents of the WWII generation.

Re:Wrong, He Has a Blog Post On It

[erikina]

I'm not sure what you're getting at.

I've used that sort of stuff regularly, but things like stop-loses (selling as the stock goes down) is counter beneficial in this sense.

The reason: The news is always released during non-trading hours. So as soon market opens again, it has already made that adjustment. So that's why it's not effective. And why it's actually counter-beneficial .. because the the order will sell your shit as soon as the market opens. That's when all the panic selling occurs. I find that the first 30m the last 30m of market hours is when a lot of beginners get burnt. (And there's a self-fulfilling lull in trading at lunch time, but it's not as bad as open & close imo.)

Then you mentioned the derivates to protect against loss. We can talk all day, but let's use some actual numbers (I'll work on close figures, if you don't mind): Intel is currently trading at: $13.00 which is actually a great figure to work with. Here is the cost of protecting against loss for a certain time period. (This is a comprehensive insurance program that guarantees you not a cent of loss).

4 day insurance: $0.46
32 day insurance: $1.10
..and I won't go any further, as it gets a little more complicated (the strike price has been changed from 2009+ onward. I'll leave it as an excersize to the reader to calculate what % of the stock value you're paying for that, but trust me, it's not cheap. And unless you have good reason for buying it, you probably won't make much money.

No fancy trading will ever come close to insider trading my friend.

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.

Re:Wrong, He Has a Blog Post On It

[k33l0r]

Holy shit, the i7 CPUs are failing en masse??!

YES, Sell, sell, sell. You should do what I do: base your trading on rumours you hear on Slashdot.

Re:Wrong, He Has a Blog Post On It

[WCguru42]

If someone thought about something you should have thought of it before you posted, bow out. Be a man. Construct an argument or idea. Deliver it once and deliver it well. If you fail, better luck next time.

Is that how it works? Really?

Re:Wrong, He Has a Blog Post On It

[ArcherB]

You just linked to O'Reilly's talking points about Mark Cuban, you insane Republican liar. The list of what you personally don't understand is bigger than Cuban's fortune.

Out of all the links I've posted, here is the entirety of what is mentioned about Bill O'Reilly:

Mark Cuban may very well find himself in serious need of some reputation management very shortly. Fox News' Bill O'Reilly discussed the soon to be distributed Loose Change, a film about the supposed 9/11 government conspiracy. Mark Cuban, billionaire owner of the Dallas Mavericks, is going to distribute it and Charlie Sheen has said he will do the narration.

Regardless of the source, is anything in that paragraph not true?

The same article also mentions Jennifer Engle of ESPN Radio. Is ESPN now a right-wing outfit also?

Again, the point was to show that Cuban is a loose cannon. Someone who leaves his mouth in gear while the brain is neutral. And again, my beef with Cuban is what he said about the San Antonio River Walk. That's a landmark in San Antonio as well as the State of Texas. You just don't insult that stuff. It would be like going to London and calling Big Ben a broken pocket watch. You do that and you're likely to piss off a few Brits, just like he pissed off a few Texans. For the record, I'm a Texan, but the lack of class and respect as constantly displayed by Cuban tends to piss me off no matter who it is directed.

Now all that aside, I'm surprised at you Doc. I usually enjoy your posts and find them quite insightful, even when they are counter to my own as we rarely agree. I've always found you to be intelligent, fair and open minded. You are not in usually good form today. I hope it's just an off day and look forward to your insight in the future.

Re:Wrong, He Has a Blog Post On It

[Anonymous Coward]

Whats REALLY coincidental is that he allegedly committed this crime one month before Stewart was sentenced to go to jail for her insider trading charge.

Stewart did not go to jail for insider trading. There was zero evidence she engaged in insider trading. She went to jail for lying to investigators while being investigated for insider trading.

More importantly, don't SEC investigators have anything better to do? There was no evidence Martha engaged in insider trading at all. And the amount under investigation, $50,000 of stock, is pretty small.

HOW MANY ENRON PEOPLE WENT TO JAIL? Why was so little effort spent trying to convict them? Enron had over $100 billion in (alleged) sales.

Personally, I think a bored prosecutor's spouse was a huge Martha fan and the prosecutor wanted to stop them from redecorating all the time.

Re:Wrong, He Has a Blog Post On It

[erikina]

..which would get you prison time if caught. :)

Re:Wrong, He Has a Blog Post On It

[7-Vodka]

This is a lawyer

Re:Wrong, He Has a Blog Post On It

[servognome]

Now let's say you're knocking back a few beers with your Intel buddy, and he tells you the i7 CPUs are failing en masse, the management is crumbling and AMD is poised to deliver a fatal blow. So in short, you are now in possession of insider information. So the question is, would you sell your stock or wait till you lose it?

First, if things were that bad, it wouldn't be insider trading because a large number of people would know (orders not getting fulfilled, OEM returns, industry reports). Second, if your buddy was involved at a level to where the information was so valuable as to constitute insider information, he likely wouldn't just tell you over a few beers since he'd be on the hook for a little jail time.
Insider information usually points towards an executive level conspiracy, rather than just blabbing at the bar.

Secondly, there's no stealing. You agreed, I agreed. We might have different information, but that's hardly a secret. And the person who is "more correct" will drive the market to correct itself. (See prediction markets).

Market regulation is meant for both long and short term stability. Allowing the use of information that can be abused by certain individuals can cause fear and panic. So while in the long-run the market will work itself out, in the short-term there could be excessive economic stress.

Re:Wrong, He Has a Blog Post On It

[servognome]

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..

More accurate? The accuracy ends up being the same in the long run as the information eventually gets out to the public. Profiting with inside trading is accomplished through short-term inaccuracy, where the market is unable to regulate to the correct price before a few individuals have gamed the system. So not only do a few people profit, you get an increase in economic instability from excess uncertainty.

Re:Wrong, He Has a Blog Post On It

[Miamicanes]

Let's not forget another SEC clusterf**k that causes endless grief to cash (non-margin) investors (especially newbies)... the "1+3 rule".

When you buy shares of stock, the funds are gone from your trading account the instant your order gets fulfilled. But as far as the SEC is concerned, you haven't actually "paid" for the shares until the close of the day's trading, and don't actually OWN the shares until the third business day after the trade.

Why is that a problem? Because the SEC ALSO prohibits cash traders from selling shares they haven't paid for yet... and classifies the act of selling shares you haven't paid for as "free riding", immoral, and deserving of punishment. Since you won't have technically "funded" your purchase until the close of the current day's trading (even though the funds were most certainly taken from your account the moment the purchase was made), it's officially verboten for someone with a cash account to buy shares, then sell the same shares later in the day. Likewise, you're allowed to sell shares of stock, and immediately use the proceeds to buy shares of a second company... but if you do, you're officially prohibited from selling THOSE shares until three days later, and once again subject to nasty punishments if you do.

Nevermind the fact that the funds are committed, seized from your account, beyond your control, and there's absolutely no risk whatsoever that payment won't be made. Or the fact that someone with a margin account funded with at least $25,000 can freely buy shares, sell them 100 milliseconds later, and do it a few more times if they feel like it. Or the fact that someone trading "naked shorts" can sell shares THEY DON'T EVEN FUCKING OWN, with the understanding that they'll buy them from someone else before the end of the day. The fact that your cash is being held in limbo by the broker until the end of the day's trading when you dared to sell the shares you bought earlier in the day to some other person makes you an evil scoundrel somehow trying to cheat the system, reap unjust rewards, and deserving of nasty, draconian punishment.

It's insane.

Re:Wrong, He Has a Blog Post On It

[erikina]

Profiting with inside trading is accomplished through short-term inaccuracy, where the market is unable to regulate to the correct price before a few individuals have gamed the system.

Exactly. Think about it. The individuals that have "gamed the system" have done so, helping to close the "short-term inaccuracy". Consider it arbitrage trading, and they're closing the perceived and actual value of a company gap.

This all happens before the knowledge is public, leading to a more *accurate* market/evaluation.

Re:Wrong, He Has a Blog Post On It

[hedwards]

The accusation was that he sold on information that he agreed not to disclose. And that he managed to keep from losing 750k. Presumably the SEC has the agreement and knows the timing.

Yes it is innocent until proven guilty, but that doesn't negate the fact that the SEC takes these things very seriously and that they have investigated the matter quite thoroughly. I'd be very surprised if he were actually innocent of the charges.

As opposed to the WMDs and Iraq, which had only a few months of research with an uncooperative President.

Re:Wrong, He Has a Blog Post On It

[barc0001]

Actually, I'm not a betting person myself, but in this case I would bet that he is anything BUT boned. Why? Because it just never looks good on the SEC's part to have a loose cannon send an email like this one to an intended suit target, especially BEFORE the suit is filed. Makes it look like the suit is retaliation, not an actual case.

Re:Wrong, He Has a Blog Post On It

[Newer Guy]

Looks like he might be 'dancing with the stripes' instead of the stars soon!

Re:Wrong, He Has a Blog Post On It

[servognome]

Exactly. Think about it. The individuals that have "gamed the system" have done so, helping to close the "short-term inaccuracy". Consider it arbitrage trading, and they're closing the perceived and actual value of a company gap.
This all happens before the knowledge is public, leading to a more *accurate* market/evaluation.

Because this happens before knowledge is public, you have less accuracy because the market as a whole doesn't have time to digest all the information to identify what the new value should be. The most dangerous element of the market is uncertainty.
So yes, a CEO selling off all his stock can lead to directional correctness as investors know the stock is overvalued. However, without any other indicators the market doesn't know how overvalued and you end up with a crapshoot of volitility that may overshoot the true market value to the downside.

Re:Wrong, He Has a Blog Post On It

[Lord Flipper]

No fancy trading will ever come close to insider trading my friend.

I get your point, and agree,but...front-running will give some insider trading a run for it's money. I actually see it as a form of insider trading, but, technically, it is a different crime, or at least, 'label' for an activity leading to the same crime (fraud).

When you mentioned, early in your post, about the lunch hour 'lull', had to laugh, because that's what reminded me of front-running.

Lunch hour at Broad & Wall is the best time to see all the 'floor' people from inside, out sitting on fountains, or whatever, hammering away at their laptops. Those usually aren't 'Hi-how-ya?' notes to old Uncle Mort that are getting hammered out. If I understood real-time packet-sniffing, that's the first place I'd go.

I'm kidding, sort of. I had an opportunity to profit from ahead-of-the-Market news, once, and took a pass. I was at editor at Merrill, in St Paul (No, not ex of 'Lynch', different company), and, around 3 in the afternoon a lady dropped a rush-rush press release (wide) and a dupe, that was headed for the SEC, on 'the close.' Needed a serious rewrite, but the gist of it was, "Apple Computer, Inc announces that an internal investigation has revealed possible irregularities in the pricing of Stock Options". As soon I saw it, I thought, "That's a 5 point drop, easy."

I was way off; it was a '7' (It might have dipped further before recovering a bit, on the overnights). But the thought crossed my mind to waltz into the deserted cafeteria or outside, for a smoke, and borrow anybody's cell phone for a call to a couple guys with serious coin. But it simply was not worth the risk, to me.

On two separate occasions (a couple of years of activity) I made serious-assed money, consistently, the 'sort of' old-fashioned way: Using my head, and looking at what seemed likely to occur, and soon. That was tremendously satisfying, in a way that 'dirty' money (not to mention the risk it carries), just isn't.

Re:Wrong, He Has a Blog Post On It

[AK Marc]

That legal principle means that no one can accurately judge someone guilty until they're proven guilty.

No, that legal principal was established because of psychology. If you parade someone into court dressed as a convict and refer to him in court as "the murderer" in front of the jury, the jury will start to believe it without knowing why. While in a courtroom, the only way to get a fair trial is to presume the person is innocent, and treat them as such. No handcuffs (unless proven to be necessary), no jail jumpsuit if a jury is present (the judge is supposedly capable of understanding the jumpsuit, so it is usually used if there is no jury in the room), and "alleged" has to be used before any assignment of guilt.

But if you judge people guilty without their going through an evidence and argument process, you're probably going to be wrong.

Horseshit. For every murder, if I presume that it was done by the well known spouse/lover of the person dead, I'd be right more than half the time (make me probably right, not probably wrong) and I'd never have to look at a single piece of evidence. Even with "TV evidence" some things are obvious. "Guilty" is a state of being that is not decided by the courts. Someone did it, and that person is guilty, regardless of whether they are convicted. Someone convicted is "found guilty" in a court of law. That means that not only are they presumed to have done the crime, but there was enough proof to remove reasonable doubt against them. This level allows sanctions. Then there's innocent, that's someone that didn't do it. And "found not guilty" never means "innocent." It means it was unable to be proven beyond a reasonable doubt. Whether they are actually innocent is not realted to it.

So, whether one is guilty or innocent is decided long before the charges are made, and is something that can be speculated on long before a verdict is reached.

Re:Wrong, He Has a Blog Post On It

[sribe]

Not only that, what she lied about must not have been a crime because she was never charged with anything else.

What she was lying about was most certainly a crime; but they never had enough evidence to prove the actual direct crime. They did however eventually have enough evidence to prove she lied about some of the surrounding events & supporting details--in a way which would only make sense if she were guilty and were trying to throw them off track.

So, the conviction was lame, yes. But she was guilty.

Re:Wrong, He Has a Blog Post On It

[SomeJoel]

What I meant was if the employer said "buy buy buy" always. Not just before key events, but at the end of every newsletter or permanently posted on the cafeteria wall, then it would not be insider trading. Of course, if the advice is timed to coincide with a financial event (earnings report or something) that is not yet public knowledge, then it is in fact insider trading if acted upon.

Re:Wrong, He Has a Blog Post On It

[darkpixel2k]

Don't think they're going to put Cuban in a women's prison. Anyway, Martha Stewart was not convicted of insider trading. She was convicted of lying to investigators.

Don't assume Martha Stewart is a woman.

why should we care?

[circletimessquare]

for all i can tell, the guy registered "broadcast.com" in the 90s, created a pretty business plan, and sold out for billions at exactly the right time, and bought a basketball team

i applaud his timing and his luck and success, but i haven't the faintest idea as to why anything this guy ever did is of any interest to slashdot

Re:why should we care?

[MChisholm]

I haven't had any luck pulling up the stories, but Mark Cuban has in the past been very outspoken on topics such as P2P file sharing and ISP traffic shaping/net neutrality.

Re:why should we care?

[DwarfGoanna]

It's easy. The Netspeak translation would be:

Mark Cuban is a Troll IRL.

Re:why should we care?

[fprintf]

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!

Re:why should we care?

[0100010001010011]

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.

Re:why should we care?

[MChisholm]

Yep, there's one. Thanks.

Re:why should we care?

[netsavior]

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?

Re:why should we care?

[Doc Ruby]

Because Cuban is a billionaire Net entrepreneur. Including harnessing P2P for infrastructure, while publicly championing the technique's place on the Internet despite network operator and copyright holder intererence. He's also spoken influentially for realistic revisions to copyright, contrary to some of his obvious interests as a major copyright holder, as an informed Internet business guru.

He just got hit with an SEC suit by the outgoing Bush on 4 year old charges, right after he launched a website investigating and organizing against Bush's Wall Street bailout.

Those topics are all often popular on Slashdot.

Re:why should we care?

[Anonymous Coward]

Including harnessing P2P for infrastructure, while publicly championing the technique's place on the Internet despite network operator and copyright holder intererence. He's also spoken influentially for realistic revisions to copyright, contrary to some of his obvious interests as a major copyright holder, as an informed Internet business guru.

Um...What?

Re:why should we care?

[Doc Ruby]

Yes, that call against P2P was bizarrely contradictory to his other public advocacy and private investments in it, as that article noted.

Even more reason why Cuban's fate is interesting to Slashdotters.

Re:why should we care?

[billcopc]

i haven't the faintest idea as to why anything this guy ever did is of any interest to slashdot

Your summary of his life's contributions is accurate, but this is Slashdot. We lost all the good editors years ago, so this garbage is all we get anymore.

Re:why should we care?

[billcopc]

Ya but he didn't do anything nerdy. He's just another MBA asshat like all the other people we've been taught to despise. His only claim to fame is playing the stock game, and poorly at that. He just got reeeeeeeeally lucky.

The main difference between Mark Cuban and the Powerball winners, is Mark Cuban was born with his ass where his mouth should be.

Re:why should we care?

[billcopc]

harnessing P2P for infrastructure

You mean Redswoosh ? The bittorrent clone he sold to Akamai, shortly before launching a crusade against all P2P traffic ?

Yeah, quite the genius alright. I can't want to read his new book "My Cuban is bigger than yours"

Re:why should we care?

[gooman]

Yea! Our first conspiracy theory!

Regardless, Cuban is a jerk.
For that alone, punishment has been long overdue.

Re:why should we care?

[Doc Ruby]

You're a coincidence theorist.

Who thinks Federal prosecution is appropriate for "being a jerk".

Let me guess who you voted for this year...

Re:why should we care?

[Eil]

He's a venture capitalist who puts up a lot of money for technology, products, and companies that make Slashdot headlines.

Re:why should we care?

[TheSync]

or all i can tell, the guy registered "broadcast.com" in the 90s, created a pretty business plan, and sold out for billions at exactly the right time, and bought a basketball team

Mark was definately a pioneer in early webcasting. AudioNet really made RealAudio popular. RealAudio was the first usable streaming audio system available to most unicast dial-up Internet users.

As Wikipedia sez:

"Cuban started a company, MicroSolutions, with support from his previous customers from Your Business Software. MicroSolutions was initially a system integrator and software reseller. The company was an early proponent of technologies such as Carbon Copy, Lotus Notes, and CompuServe. One of the company's largest clients was Perot Systems. In 1990, Cuban sold MicroSolutions to CompuServe--then a subsidiary of H&R Block--for $6 million. He retained approximately $2 million after taxes on the deal.

In 1995, Cuban and fellow Indiana University alumnus Todd Wagner started Audionet, combining their mutual interest in college basketball and webcasting. With a single server and ISDN line, Audionet became Broadcast.com in 1998. By 1999, Broadcast.com had grown to 330 employees and annual revenues near $100 million. In 1999, during the Dot-com boom, Broadcast.com was acquired by Yahoo! for $5.9 billion in Yahoo! stock."

Here is a post from Mark from 1995 about AudioNet.

Re:why should we care?

[gooman]

Coincidence Theorist.

I like it! I shall have t-shirts made. Thank you.

Please note, I never said Fedreal prosecution was necessary. I notice you don't refute my initial statement: "Cuban is a Jerk." That's just my opinion. I've had that opinion for a while now. Nothing to do with this insider trading issue.

I like to believe in a "What goes around, comes around - You reap what you sow" kind of justice. Some folks call it karma.
It doesn't always happen, but I am amused when it does.

How does my opinion of Mark Cuban reflect in any way on my voting record?

Re:why should we care?

[Anonymous Monkey]

Because if I don't like you you must have voted for the other guy. Oh, and you worship the delve, eat puppys and love The New Kids on the Block. Oh, and you wanted the emperor to win in star wars too. By the way, I think Coincidence Theorist would make a very cool sig line.

Re:why should we care?

[gooman]

Hey, I'm betting you voted for the same guy I did!

Re:why should we care?

[ultranova]

Ya but he didn't do anything nerdy. He's just another MBA asshat like all the other people we've been taught to despise. His only claim to fame is playing the stock game, and poorly at that. He just got reeeeeeeeally lucky.

Wall Street is just another abstract system, not unlike a computer. Hacking it is what nerds should do. Doing so would benefit everyone, for it could certainly use better sysadminds.

It's good to be rich...

[HerculesMO]

I wish *I* could be charged with insider trading.

It would mean I'm worth it enough to go after :(

Re:It's good to be rich...

[megamerican]

No, it would mean that you are famous enough for people to pay attention while the real criminals get away with whatever they were doing.

Such as the FED recently giving away $2 trillion and won't disclose who they gave it to. Or the fact that half the $700 billion bailout has been given away with zero transparency.

Mark Cuban is just a public scapegoat, just as Stewart was.

Re:It's good to be rich...

[megamerican]

Don't forget about the automaker bailout which is designed to help GM and others to pay for their newly built factories in other countries. GM just opened a $300 million factory in St. Petersburg, Russia. A few months ago they opened another huge factory in India, a $250 R&D facility in China and are planning on buying larger stakes in a few Chinese automakers.

Where do they get the money to do all of this? The American tax payer of course!

Retaliation for Cuban's Anti-Bailout Website?

[Doc Ruby]

Interesting how Cuban suddenly gets prosecuted right after he launches a website organizing against the Bush/Paulson Wall Street bailout called BailoutSleuth, in the final weeks of Bush's power to direct the SEC, even though Cuban's transactions happened in 2004.

And by "interesting", I mean "suspiciously consistent with Bush's treatment of the Justice Department as a political asset for selective prosecution".

Re:Retaliation for Cuban's Anti-Bailout Website?

[MindlessAutomata]

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?

Re:Retaliation for Cuban's Anti-Bailout Website?

[JoshuaZ]

People often do stupid things for very little gain. Look at Martha Stewart. She engaged in insider trading for a few tens of thousands of dollars despite her massive wealth. It wouldn't surprise me in the slightest if someone in Cuban's position would engage in insider trading even when the pay-out is small compared to his current wealth.

Re:Retaliation for Cuban's Anti-Bailout Website?

[Doc Ruby]

What are you talking about?

Re:Retaliation for Cuban's Anti-Bailout Website?

[Anonymous Coward]

Perhaps your country will look less like a fascist dictatorship and more like other western countries.

Re:Retaliation for Cuban's Anti-Bailout Website?

[MindlessAutomata]

Obama + Congress are going to make the nation run more like a European one is, which is far more socialist than where we are now.

I could be wrong. But that's what I'm suspecting...

Re:Retaliation for Cuban's Anti-Bailout Website?

[MindlessAutomata]

So you're saying that Obama and Congress are NOT going to tilt this country towards a more European style?

Nevermind, you won't even respond.

Spin-Doctoring at its best.

[Trojan35]

So, Cuban commits SEC fraud, and we're supposed to ignore it because he's anti-Bush and it was 4 years ago?

Re:Spin-Doctoring at its best.

[Doc Ruby]

No, I didn't say ignore it, and I didn't say he's not guilty - or that he's guilty.

I just said that the timing should make us suspicious of who and what is really ordering this prosecution. Especially since Bush crippled the "Justice" Department by using it for selective prosecution of political enemies, and this suit would be perfectly consistent with that. And because the bailout is a $TRILLION (or several) ripoff of your money, further crippling your government. Even if you can't understand the politics behind the attack, the implications of it should alarm you enough to pay attention, not to ignore anything.

Re:Spin-Doctoring at its best.

[GreyWolf3000]

Didn't the democrats draft and propose the bailout bill? It seems like both parties teamed up for this one..

Re:Communism at work.

[Anonymous Coward]

Perhaps you should learn what Communism actually is, before making an ass of yourself here?

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).

Re:Summary is incorrect

[neoform]

and to think, he did this illegal trade to save himself about $300,000..

what a dumbass.

Re:Communism at work.

[kaizendojo]

..Not to mention that card counting (while *not* illegal) can result in the players ejection depending on where you gamble. In Las Vegas, for instance, casinos are allowed to do this because the casino is private property, and the owner can decide who is allowed to enter.

oblig

[musikit]

looks like he is going to federal pound me in the ass prison

That's not allowed!

[one_red_eye]

Insider trading isn't allowed if you're not in the insider trading club.

Re:Communism at work.

[pcolaman]

Whether he did it or not is debatable. But if he did what is indicated, it is illegal as well it should be. Here, let me explain this to you in layman's terms. If you have insider knowledge (knowledge that would not be public info to normal stockholders) that earnings either skyrocketed or crashed, and you have this info days in advance of when it will be announced, you are barred from buying or selling stock as a result. If you do it anyways, you are gaining from knowledge that is not available to every stockholder and thus you have engaged in insider trading. This is illegal so that people like Cuban can be kept from unfairly affecting the markets, in an attempt to:

a) tank a company on purpose

b) to artificially inflate or deflate the value of a stock in order to take advantage of either the investors or the company, or

c) To stop from having big losses which you would normally be subject to with normal market rises and falls.

And as a side question, what the fuck did your post have to do with Communism? I must've missed where you explained that.

Re:Communism at work.

[MindlessAutomata]

I think he meant "wrong" not in a legal context but in a moral context; his argument thus leading, "neither of these two things are really wrong and should not be illegal".

Re:Communism at work.

[cyngus]

"Man uses free market mechanisms to avoid losing three quarters of a million bucks, and Big Brother comes down on him."

Markets only work when all the players have access to all the information, otherwise the market prices things incorrectly. The problem is that we don't operate in a perfect market where all information becomes available to all agents at the same time. For example, companies have to put a lot of work in place before announcing a dilutive secondary offering. Therefore, some people with stock in the company will find out about this ahead of time and if they engage in transactions, its a market failure because the parties in the trade are operating on what can only be asymmetric information. If allowed, this results in all assets being sold for less than they are worth because purchasers would be irrational not to demand a risk discount since they can't trust that they know as much as other agents.

No market has perfect information flow, but we can, and should disallow the worst cases of information asymmetry.

Re:Communism at work.

[MindlessAutomata]

a) That's what government is for, right? But jabs aside, that would be a risk of the corporate system. Why do corporations deserve such a protection?

b) I believe this is actually legal--that is, for a group of people to suddenly buy/sell a stock to influence its price and then make a killing on the results.

c) Again, another what should be a risk of the whole stock market game.

Why should it be illegal, and not just a risk of playing this game? If the risk is too big, or the game seems like a cheat, you don't play. If the investment is too risky, don't take it.

Of course, I guess nowadays we don't believe in risks and payoffs, do we? Just bail out businesses that take risks, then everyone can succeed!

she was jailed for PERJURY?

[peter303]

Lying about inside trading was more serious than the modest trading itself. However the the SEC stripped her of the right to be CEO and be on boards for the trading conviction. Was that permanent?

No Jail Time

[Nixoloco]

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..

Re:No Jail Time

[nabsltd]

Since they don't want jail time, I can see why he wouldn't be worried even if he did do something wrong.

Any fine is going to be pretty much a drop in the bucket for him. Sure, he won't like paying the $1-10M (based on his avoiding $750,000 in losses), but we won't see him on the street with a "will work for food" sign anytime soon, either.

Re:No Jail Time

[Muad'Dave]

b. ordering Cuban to disgorge...

Why do I get the image of a snake orally ejecting a rat carcass when I read that?

Twice now

[fishbowl]

Twice in my career I have had a good laugh at the expense of someone whose abuse I suffered.

The first was David Duncan. He was a senior finance/accounting manager when I was a peon at Mobil. I basically had to jump at his every request even though I never worked for him or his department. I left that job to start an internet business, but I really enjoyed the day that I saw David Duncan testifying before Congress, explaining Enron to them. Beautiful day.

The second is today. When my internet company was encoding and streaming his sports and talk radio broadcasts (innovative for 1994, mind you), Mark Cuban used to page me and call me at home at all hours with the most unreasonable demands and questions. Now I realize if I had been willing to kiss his ass the way he was accustomed to being kissed, I might be a billionaire today, but it would never have happened. Today I am all smiles.

Re:Twice now

[operagost]

Very interesting. Sorry I wasted all my mod points on the stupid light saber article :-P

Where can I buy shares...

[heretic108]

...in the private corrections firm which will be accommodating him?

bill gates, steve jobs, bill joy, michael dell...

[circletimessquare]

making billions doing nerdy things

mark cuban: making billions. but not doing a single nerdy thing

More information here

[weiserfireman]

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

Re:More information here

[CodeBuster]

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?

So don't take his call or simply say, "La, La, La...I'm not listening!" when he tries to give you insider information.

Re:More information here

[weiserfireman]

Sure, you can do that, but the law doesn't currently cover this situation, they are trying to stretch it to fit this situation.

I am not a fan of Prosecutors stretching the law like this when something bad happens that doesn't have a law against it (Jack McCoy syndrome). It makes for really bad case law down the road.

Re:Communism at work.

[IgLou]

NO it is wrong, he had a legal obligation to not act on his knowledge until it was disclosed to ALL shareholders. He's in partnership with those shareholders. Would you ever enter a contractual partnership where your partner could openly screw you over and not have to answer for it? The answer would be NO. IAMAL but my understanding is the law has simply set out a framework to make it easier for business to incorporate and for investors to put their money into those businesses. If he had foreknowledge, he shouldn't have sold off until it was disclosed and every c-level businessperson knows this. He had a fair opportunity to sell off

Drop the communism gripe because in the end saying that a group of people collectively own a business by being shareholders sounds pretty communist to begin with.

Well he did decide to finance BailoutSleuth

[Rastan_B2]

Bit of a coincidence that this comes about just after he started and funded http://www.bailoutsleuth.com/ even though it was four years ago...

Must be a joke

[frovingslosh]

If you RTFA you find "The Commission's complaint seeks to permanently enjoin Cuban from future violations of the federal securities laws....". So am I to understand that part of Mark Cuban's "punishment" is that in the future he will not be allowed to violate the same laws that everyone else is already expected to not violate?

Do it on the iPhone instead

[Dr. Transparent]

Requires less time in prison. http://www.insidetraderapp.com/

Can AND WILL Be Used Against You

[bill_mcgonigle]

To be fair, the lesson I take from it is don't lie to the feds without a lawyer present. (And even then...)

Anything you say that turns out not to be true, even if you don't know it, "can and will be used against you in a court of law." Anything you say that helps you is inadmissible as 'hearsay'.

So if you do a two hour interview, are thoroughly truthful except for 15 seconds, which you may or may not know is not true, the jury will only know about those 15 seconds. Somebody file a bug.

Re:Can AND WILL Be Used Against You

[TeraCo]

Well, the fact that you were honest for most of the time does not detract from the fact that you have still lied to a criminal investigator. I'm sure Hans Reiser has met many women without killing them, but that wasn't used to mitigate his sentence.

Re:Can AND WILL Be Used Against You

[bill_mcgonigle]

Well, the fact that you were honest for most of the time does not detract from the fact that you have still lied to a criminal investigator.

What if you were mistaken? What if you were mislead? What if you were quoted out of context?

Anything you say that would support any of those defenses is inadmissible.

Just tell me if I have this right

[Concern]

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..

Just want to be sure I understand. If you were making an equities market, you don't see the value of trying to have a level playing field for information, where all those who would trade an equity have the same information about it (or, if insiders, they'd have some rules on how they can trade)...

Sort of like the SNL all drug olympics, right? Ah, I kid. :D

But for serious now, am I supposed to be happier about investing in your insider-trading-friendly market, versus one that does make an attempt to be transparent?

Do you propose that your market (where I am virtually guaranteed to get rooked unless I am an "insider") will draw more investors than a more transparent market (were more investors have a more level playing field)?

In fact, you really think the less transparent market is actually more accurate?

I should say I thought the point of your market was for it to be less accurate, and therefore provide more of an opportunity for insiders to take money from outsiders. :)

Do you have any comment on the relative historical success of transparent markets (such as those in first world nations) versus less transparent markets (either in fact and in principle), such as those in the 3rd world, over say, the last 50 or 100 years?

Do you mind if I ask, which kind of market has the majority of your investments?

Re:Just tell me if I have this right

[erikina]

Just want to be sure I understand. If you were making an equities market, you don't see the value of trying to have a level playing field for information, where all those who would trade an equity have the same information about it (or, if insiders, they'd have some rules on how they can trade)...

A bit of a loaded question. If I could magically ensure information symmetry, I would. But I believe trying to enforce this level-playing-field idea is ridiculous. We're barely making a dent in "the problem", just enough to make it more profitable for those that do. Not only that, but we're throwing people in jail for doing something 99.9% of us would do..

Sort of like the SNL all drug olympics, right? Ah, I kid. :D

:P but yeah, equity markets serve quite a different purpose than sporting events :P

But for serious now, am I supposed to be happier about investing in your insider-trading-friendly market, versus one that does make an attempt to be transparent?

Of course not. I too would be more hesitant, but the purpose of the stock market isn't designed as a form of entertainment.

Do you propose that your market (where I am virtually guaranteed to get rooked unless I am an "insider") will draw more investors than a more transparent market (were more investors have a more level playing field)?

Yes. The market will react quicker, and (I believe) the liquidity would be slightly stronger.
And I disagree about your getting rooked statement. The only reason I can see that holding true, is if allowing insider-trading provided increased incentives for market minipulation. Which it probably does, but the sort of people that try manipulate the market aren't dumb enough to do anything in their name, so insider trading laws really don't bother them..

In fact, you really think the less transparent market is actually more accurate?

I should say I thought the point of your market was for it to be less accurate, and therefore provide more of an opportunity for insiders to take money from outsiders. :)

People that give false information to "outsiders" to take advantage of them have never worried about insider trading laws. They will continue to operate as usual, and we already have laws and regulation in place to deal with that.

Do you have any comment on the relative historical success of transparent markets (such as those in first world nations) versus less transparent markets (either in fact and in principle), such as those in the 3rd world, over say, the last 50 or 100 years?

Good point, but this is more correlation than causation. A country that can afford to regulate, is clearly better off. A country that is well regulated/transparent has less corruption etc. I have never invested in any Chinese company, not because they don't have strict insider-trading laws - but because I have no way of knowing if figures released are accurate etc. etc.

While investing in Australian and American companies I have no such hesitation

Do you mind if I ask, which kind of market has the majority of your investments?

I'm on the board of directors for an Australian company that deals exclusively with industrial properties. And my personal holdings are exclusively in the United States stock market. (My only current position is actually selling calls on Intel .. the calls I sold will expire in four days, and I will look to do something similar again)

Re:Just tell me if I have this right

[Concern]

But for serious now, am I supposed to be happier about investing in your insider-trading-friendly market, versus one that does make an attempt to be transparent?

Of course not. I too would be more hesitant, but the purpose of the stock market isn't designed as a form of entertainment.

Well, I am always entertained by the sight of suckers losing money. :D That said, I think if you hesitate less to buy in the more regulated market, and so do I, and so do most people, then governments end up regulating markets in this way, because who doesn't want more capital. :)

People that give false information to "outsiders" to take advantage of them have never worried about insider trading laws. They will continue to operate as usual, and we already have laws and regulation in place to deal with that.

You are right of course. We can't stop all crime, but we do prefer to live in the regions of the world where they try. :)

Good point, but this is more correlation than causation. A country that can afford to regulate, is clearly better off.

Touche. I personally believe such regulations are causative, but I suppose proving it to you will be difficult. :)

And my personal holdings are exclusively in the United States stock market. (My only current position is actually selling calls on Intel .. the calls I sold will expire in four days, and I will look to do something similar again)

Hah! I salute you.

Well, I submit that insiders may trade sooner than everyone else with inside information when allowed to. I'm not sure if this makes a market more efficient. Information becomes public soon enough and then everyone trades on a level playing field and the market gets where it's going anyway. Meanwhile investors would never willingly choose a market where they always get sloppy seconds to the very people that want their money. So my thesis is, money avoids those markets, hence, reduced liquidity. Just a theory.

Re:Just tell me if I have this right

[erikina]

Thank you for the civilized discourse. :)
It's one of those topics that not many people seem capable of thinking straight about it.

I met a man Rene Rivkin who seemed to love what he did (stock trading) and we talked about a mobile device he carried around for constant stock feeds (I believe he called an "Orange" or something). Anyway, he later was found to have made $2,000 with some insider knowledge, was sentenced to jail, lost his license all which ultimately led to his suicide.

And when you disagree with the premise that insider trading is evil, realize that the only people getting caught are the ones that made no attempt to cover their tracks -- it just seems a little crazy. But then again, I'm also against crap like the "war on drugs" for similar reasons (un-enforceability and the result of trying to).

Re:Just tell me if I have this right

[erikina]

Well, I am always entertained by the sight of suckers losing money. :D

Reminds me of when I was at the casino, watching the "high rollers" at their baccarat tables playing with stacks of $250 and $500 chips. I figure this must sort of skill game, and they must be doing it professionally. But reading the casino provided rule book, it's pretty clear it's just a game of chance where the house is constantly scraping a couple percent.
Maybe I'm a little sick, but there was something satisfying about watching them reluctantly pull out their wallet and buy another grand of chips.

Re:Just tell me if I have this right

[Concern]

My pleasure.

I hadn't heard of Rene Rivkin. Thank you for sharing the story.

But then again, I'm also against crap like the "war on drugs" for similar reasons (un-enforceability and the result of trying to).

Touche again. For some ideals, we must try and fail. For others, we should not try at all. Then again I'm not sure prohibition (especially against certain drugs) is even an ideal.

For white collar crime, I grow exceedingly weary of the American double standard - where lowly proletarian criminals do years of hard time for stealing a stereo, versus the feather delicate touch of the law on those who commit financial crimes, often of vastly greater magnitude.

I can't help empathizing with Rene, although at the risk of lowering the tone, I'll speculate that someone who lost years of their life in prison due to a more proletarian crime of even lower dollar value might find a suicide over weekend detentions and a lost professional license practically effete.

Perhaps judicial harshness in general is the problem, although that's a tougher riddle to solve.

Ahhh, Vegas. I really want to buy the casino's mailing lists and try to sell all those people something. It's just so wonderfully democratic - money may not go to the just or the righteous, but (when properly regulated) it usually at least finds its way from the stupid to the intelligent. Flawed as it is, I might wager it's man's best innovation so far. :)

Re:Just tell me if I have this right

[erikina]

For white collar crime, I grow exceedingly weary of the American double standard - where lowly proletarian criminals do years of hard time for stealing a stereo, versus the feather delicate touch of the law on those who commit financial crimes, often of vastly greater magnitude.

I hear the same thing everyday from the business community, except about the comparative lax proletarian crime enforcement. I guess it depends what side of the fence you stand on.

On my list: Government corruption. Every branch of the government is corrupt. Every big deal that goes down seems to have kick-backs going everywhere. And it's getting to the point, that the average person is starting to notice it. When you give these people a sanctioned monopoly on power, it's going to get abused. Even if it's something as trivial as approving building applications (Ever wonder why some get approved in a month and others 6 months. (Or if you've pissed them off, they simply will not give you an answer and after 18 months you'll need to take them to court to do so.))

And then you got over-regulation. Every year they pump out more legislation and it's seriously taking a toll on people. It would be nice if they could take a step back and say "Hey, do we really need 60,000 pages of tax law?" or "Should it really cost $300k in compliance costs to start a managed investment?"

And then there is of course our wonderful legal system -- it's great in theory, but I rarely see it being used for "what is right" but as a weapon. I've seen black and white lawsuits rack up bills over a hundred thousand dollars - to then give the other party 20k to piss off. Or people (corruptly) get blatantly criminal behavior (like stealing a few million dollars from company coffers) recorded as "negligence" for their negligence insurance. God damn.

And if it becomes too political and they go after you -- you'll lose everything but your money.
I could go on, and give a few examples - but I fear what I write here will come back to haunt me.

Re:Just tell me if I have this right

[Concern]

I hear the same thing everyday from the business community, except about the comparative lax proletarian crime enforcement. I guess it depends what side of the fence you stand on.

Hah! True, but I'm not sure it's necessary to throw up hands without being able to understand whether blue collar or white collar criminals do more time versus the cost of their crimes to society. :) One can simply read these things, or ask a prosecutor.

I will say there's an emotional reaction when someone breaks into your house to steal $200, which just isn't there when someone makes a phone call to cause $2000 of my money to disappear in some more abstract, complicated way. Human justice is based on human emotions, cultural and traditional ideas of fair play, no way around it.

Then again, for most of human history that's involved things like monarchs and the Auto de fe. :) We have to at least try to be rational; usually our level of success at that determines our quality of life. :)

I heartily agree about corruption. Stateside, it feels more like South America every day. "Expediters," for instance, are everywhere now - I always chuckle when I hear the word (read: bribery facilitator, usually an ex-employee of the department you're working with). As the general level of education has declined, so have standards. I really wish we could send US kids to study abroad in the 3rd world for a year so they can see what the stakes are.

Yes, we are over-regulated in many respects, and I agree specifically with the two cases you mention.

Don't even get me started on the courts. Not sure how bad it is in Australia. In the US, you can steal hundreds of thousands of dollars and simply get away with it. I've seen it happen. Why? Because the cost of civil litigation is... hundreds of thousands of dollars. Plus you have to be up for spending years in the broken civil court system. Plus you have to be prepared to lose, because the quality of the bench is not what it used to be...

Why suspicious?

[DesScorp]

"I just said that the timing should make us suspicious of who and what is really ordering this prosecution."

Why should the timing be suspicious? Your theory that this is Bush's payback for all of the anti-Bush stuff Cuban has funded over the years has one huge flaw; when Bush leaves in two months, so does his appointees. This is just an indictment. The prosecution will be the responsibility of the Obama Administration, and if they don't see a problem, they can simply drop it. What are you going to say if they continue the prosecution? That Dick Cheney has a mind control device implanted in Obama's brain? It'd be about as plausible as all the other conspiracy theories you're offering.

Re:Why suspicious?

[Doc Ruby]

The indictment is keeping Cuban busy and costing him immediately, while sending the message that Cuban got hit.

You don't have a good coincidence theory, so you're just ignoring it all.

Recent conversation with co-worker

[myth_of_sisyphus]

I recently had a mind-blowing conversation with the new maintenance guy. He's got one of those macho, forceful personalities that can't withstand criticism or anything against what he 'knows'. (Actual conversation. I wrote it down after to keep it fresh.)

Anyways, we were talking about the internet. He says "I read the internet all the time. I keep up on all the news. "

Then he says "You know those two Google guys are gay right?"

I say "Well, one is married and the other is about to be married. So unless they're on the Downlow, I don't think they're gay."

He says "Oh, I mean those two YouTube guys. And the Myspace guys. You know Google owns Myspace right?"

I say "Well, Google bought YouTube, but I don't think they have anything to do with MySpace."

He says "Yeah, Google bought MySpace. Anyways, those guys are gay. And I was also reading about the inventor of the internet!"

(I"m thinking "Tim Berners-Lee???? DARPA??? Who is he going to say is the inventor of the internet?)

He says" Yeah the inventor of the internet---MARK CUBAN."

I'm flabbergasted. Mark Cuban.

I say "Mark Cuban sold the site called Broadcast.com and became a billionaire. But he didn't invent the internet."

He says "Yeah he invented the BROWSER."

I say "I don't think he invented the browser. The first browser was called MOSAIC and invented by a bunch of specialists working for a university or the government or something."

He says "No he invented the internet.

I don't know what to say at this point and just say "uhhhhhhhh....ok.....Looks like you've been doing a lot of reading the internets."

Re:Recent conversation with co-worker

[MarkGriz]

He says" Yeah the inventor of the internet---MARK CUBAN."

Mark Cuban?! HAHAHA.

What an idiot. Everbody knows Al Gore invented the internet.

Re:Communism at work.

[Kaz Kylheku]

There is never perfect information in any market. That is one of the reasons why there is a spread in prices; there is no one ``correct'' price, just a moving point at which bids meet asks.

Buyers and sellers always conceal some things from each other, in any transaction. If you're buying a used car, you don't know everything about it, and you don't know everything that the seller knows.

The people who get hurt by insider trading are gamblers. Insider trading doesn't hurt the market's long-term valuations of an equity which has some kind of intrinsic worth supported by its fundamentals.

Naked Short Dancing

[Halmos]

His attacks on those trying to out naked short selling I thought were vindicated by his lousy performance on Dancing with the Stars. This is somewhat more resolving. I bet Bud Burrell saw this coming months ago.

Re:Communism at work.

[pcolaman]

It's illegal because it is an unfair manipulation of the system. When I worked for a major ISP, we always got emails days or weeks before an announcement of earnings statements, new techs we were launching, etc. We were specifically barred from buying or selling stocks until the info was public for 2 days, and this was done to protect the integrity of the information. You do realize that barring insider trading protects not the corporations, but the shareholders, right? The corporate CEOs probably wish they could engage in insider trading, as it would allow them to mitigate a lot of their own risk. You, like the original poster, only think in small terms (boo on the "man," in this case, the corporate big wigs) and fail to grasp the larger picture. If the government just wanted to let the companies run the show, they'd not set any rules in the stock market and uber-corporations would run the show in the financial district. And if you have some fairy tale in your head that makes you think that they run this country, then why did all of the major banks begin collapsing? It's because they are not running the show, they are just along for the ride.

This has nothing to do with Cuabn being an insider

[unassimilatible]

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.

This case had nothing to do with Cuban being an insider. It is about Cuban (the Tippee) trading on a tip from the CEO (the Tipper).

Anyone - no matter how much or how little stock he owns - may not trade on insider information, you, me, Rob Malda. This is known as "tippee" liability. And it's exactly what got Martha Stewart in trouble (actually, lying to the feds about it and obstructing justice is what really got her in trouble).

IAALBNYLSDNROTAA (I am a lawyer, but not your lawyer, so do not rely on this as advice).