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SEC accuses Mark Cuban of insider trading of Mamma.com
WASHINGTON -- Federal regulators on Monday charged Dallas Mavericks owner Mark Cuban with insider trading for allegedly using confidential information on a stock sale to avoid more than $750,000 in losses.
Cuban disputed the allegations by the Securities and Exchange Commission and said he would contest them.
The SEC filed a civil lawsuit against Cuban in federal court in Dallas. The agency alleged that in June 2004, Cuban was invited to get in on the coming stock offering by Mamma.com Inc. after he agreed to keep the information private.
Cuban owned 6.3% of Mamma.com's stock at that time and was the largest known shareholder in the search engine company, according to the SEC. The agency said Cuban knew the shares would be sold below the current market price, and a few hours after receiving the information, he told his broker to sell all 600,000 shares before the public announcement of the offering.
By selling when he did, Cuban avoided losses exceeding $750,000, the SEC said in its lawsuit. Montreal-based Mamma.com changed its name to Copernic Inc. in June 2007.
"It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market," Scott Friestad, the SEC's deputy enforcement director, said in a statement. The agency alleged that Cuban acted with "scienter," a legal term indicating knowledge of wrongdoing.
The SEC is seeking a court judgment against Cuban finding that he violated the antifraud provisions of the federal securities laws, an injunction against future violations, an unspecified civil penalty and restitution of the losses Cuban allegedly avoided.
Unless he is subject to an injunction, Cuban "is likely to commit such violations again in the future," according to the SEC suit.
Cuban's attorney said in a statement that the SEC's case "has no merit and is a product of gross abuse of prosecutorial discretion."
"Mr. Cuban intends to contest the allegations and to demonstrate that the (SEC's) claims are infected by the misconduct of the staff of its enforcement division," Ralph Ferrara wrote in a note posted on Cuban's blog.
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