A federal court has revived Mark Cuban’s insider trading case. On November 17th, 2008, the SEC charged internet entrepreneur Cuban with insider trading for selling 600,000 shares of the stock of Mamma.com (an Internet search engine company) on the basis of material non-public information concerning an impending stock offering. The SEC alleges that in June, 2004 Mamma.com invited Cuban to participate in a stock offering where the stocks would be sold below the prevailing market price. Cuban, an owner of 600,000 shares, did not like that his holdings would be diluted with the below market price stock sale. So he sold all of his holdings.
After Cuban sold his holdings, Mamma.com announced the offering and the stock price went down by 9.3% the next day. The SEC alleges that Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the offering, and says this is illegal insider trading. Initially, the case was thrown out by the U.S. District Judge Sidney Fitzwater. Today, it was revived. The WSJ reports that “Mark Cuban will appeal the decision and called the SEC’s case “utterly meritless.” Mr. Cuban is also seeking a judgment to have the SEC pay his attorneys’ fees and has alleged the SEC pursued the case as “a result of a pre-existing bias” against him.”
Here are the details of Mark Cuban’s Insider Trading Case.