Dallas Mavericks owner charged with insider trading
Mark Cuban calls charges 'a product of gross abuse of prosecutorial discretion'
The U.S. Securities and Exchange Commission on Monday charged Mark Cuban, the owner of the Dallas Mavericks basketball team, with insider trading.
The SEC alleged that Cuban 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.
Cuban challenged the charges, calling them "a product of gross abuse of prosecutorial discretion."
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 is 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 alleges 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.
"The complaint … alleges that Cuban knew that the offering would be conducted at a discount to the prevailing market price and that it would be dilutive to existing shareholders," the SEC's filing said.
"According to the complaint, later that day, Cuban called his broker and — in breach of his agreement to keep the information confidential — instructed him to sell out his entire position in the company," the SEC said.
The SEC alleges Cuban called his broker less than four hours after hearing about the stock offering.
After the stock offering was publicly announced, Mamma.com's stock price opened at $11.89, down $1.215 or 9.3 per cent from the prior day's closing price of $13.105.
The charges, which have yet to be proven, were filed by the SEC in U.S. District Court for the Northern District of Texas.
The SEC wants Cuban to pay back the money he made, pay an additional financial penalty, and be hit with an injunction preventing him from doing it again.
Cuban responded in a posting on his blog.
"I wish I could say more, but I will have to leave it to this, and let the judicial process do its job," he wrote.
"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," he said.