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Dallas Mavericks' Owner Heads to Court for Illegal Insider Trading
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 insider information.
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. ( TSX:CSU ) 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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