A U.S. judge has tossed out insider-trading charges against Mark Cuban, the owner of the Dallas Mavericks basketball club.
U.S. District Judge Sidney A. Fitzwater issued the decision Friday in Dallas and granted the U.S. Securities and Exchange Commission 30 days to file an amended complaint.
The SEC charged Cuban in a civil lawsuit in November 2008, alleging that he sold his shares of an internet search engine company based on information that had not been disclosed to the public of an impending stock offering.
At the time of the alleged infraction, the Montreal-based company was called Mamma.com, and Cuban was its largest known shareholder. The company is now called Copernic Inc.
According to a complaint from the SEC, Cuban was alleged to have sold his entire 600,000-share position in June 2004 in Mamma.com on the basis of non-public information concerning the pending stock offering. The SEC's complaint alleged Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the stock offering.
The regulator said that in June 2004, Cuban was invited by the company to participate in the share offering after he agreed to keep the information confidential.
At a hearing in late May 2009, lawyers for Cuban argued that he was not a company insider. Lawyer Ralph Ferrara said Cuban wasn't liable, because he was only an investor who had allegedly promised confidentiality during a phone call.
In his 35-page ruling, Fitzwater said the SEC didn't accuse Cuban of promising not to trade shares based on the confidential information he received from the company.
The judge ruled the SEC couldn't hold Cuban liable for illegal insider trading, but he said the SEC could file a new complaint against the basketball team owner if it can allege that Cuban promised not to trade on the information.