Dallas Mavericks and HDNet owner Mark Cuban was levied of charges by the Securities and Exchange Commission on Monday of having been involved in insider trading.
According to a report by the Associated Press, federal regulators have filed a civil lawsuit in a Dallas court in which Cuban is accused of having unlawfully sold shares of stock in the search engine company Mamma.com, Inc. in 2004.
The report indicates that Cuban was invited to be brought in on a coming stock offering by Mamma.com under the condition of agreeing to keep information private.
The SEC is claiming that Cuban knew his stake — pegged at 600,000 shares, or 6 percent ownership in the company — would be sold below the current market price after learning that Mamma.com was raising money through a private investment in a public entity. The suit states that Cuban instructed his broker to sell all of his shares in the search engine company once he was privy to the information.
SEC officials are seeking to impose financial penalties and confiscate Cuban’s gains from the trades. Whether the former Broadcast.com owner faces criminal charges will be left up to the U.S. Attorney in Dallas.
“As we allege in the complaint, Mamma.com entrusted Mr. Cuban with nonpublic information after he promised to keep the information confidential. Less than four hours later, Mr. Cuban betrayed that trust by placing an order to sell all of his shares,” Scott W. Friestad, deputy director of the SEC’s Division of Enforcement, said in a statement. “It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market.”
Speaking on Cuban’s behalf, attorney Ralph C. Ferrara said that Cuban intends to contest the suit.
“This matter, which has been pending before the Commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion,” Ferrara is quoted as saying. “Mr. Cuban intends to contest the allegations and to demonstrate that the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division.”
Cuban also went on the record in a statement released to the press in which he proclaims his innocence.
“I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions,” Cuban said in the statement. “The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”
The Associated Press contributed to this report.