Last week a federal judge denied the request made by Dallas
Mavericks owner Mark Cuban to dismiss his five-year-old insider
Judge Sidney A. Fitzwater, a Federal District Court judge in
Dallas, decided that the SEC's civil action suit against Cuban
will proceed to trial. The SEC filed a civil lawsuit against
Cuban in 2008 accusing him of trading his shares based on illegal
The SEC claims that in June 2004 Cuban sold his entire stake in
Mamma.com right before it announced news that caused the price of
the stock to drop drastically. Prior to his sell, Cuban owned
about six percent of the Mamma.com. The CEO of Mamma asked Cuban
if he wanted to participate in a private share offering. Cuban
declined and the next day sold all of his shares, a move that
saved him from losing $750,000.
Mamma.com was a small Internet search company based out of Quebec
City, Quebec, Canada. In 2007 it changed its name to Copernic
Inc. Copernic is now a subsidiary of Constellation Software Inc.
) and specializes in computer software.
The Mavericks' owner still claims that he's done nothing wrong.
But the SEC maintains its allegations that Cuban knew that he had
received confidential information in regards to Mamma.com. Cuban
attempted to counteract that accusation by stating that insider
trading laws did not ban him from selling his stock.
The SEC issued the following statement concerning allegations
against Mark Cuban:
Cuban deceived Mamma.com by agreeing to maintain the
confidentiality of the material, nonpublic information concerning
the private investment in public equity ("PIPE"), agreeing not to
trade on the information, but then selling all of his stock in
the company without first disclosing to Mamma.com that he
intended to trade on the information, thereby avoiding
substantial losses when the stock price declined after the PIPE
was publicly announced.
In 2009 Judge Fitzwater threw out Cuban's case but a Federal
Appeals Court reversed the judgment and sent the case back to him
to be tried. Judge Fitzwater made a statement saying that the
case against Cuban was a "close one" but that the SEC was
entitled to present its case to a jury.
The trial between the Securities and Exchange Commission and Mark
Cuban is set to take place in Dallas sometime in June.
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