Feeds

Mark Cuban charged with insider trading

SEC: Mamma.com stock was so ugly...

SANS - Survey on application security programs

Mark Cuban, technology entrepreneur, billionaire, Dallas Mavericks owner, and ardent attention-seeker is getting a new title by the US Securities and Exchange Commission (SEC) today: "defendant."

The SEC has charged Cuban with insider trading, accusing him of dumping his entire stock in a start-up Internet search engine company within hours of receiving advanced notice of a deal.

According to the complaint, Cuban owned 600,000 shares of the Montreal-based search engine, Mamma.com, in 2004, making him the then-largest shareholder at the company.

That year, the firm's investment bank convinced Mamma.com that it should raise some quick cash by holding a private investment in public equity (or PIPE) deal. A PIPE involves selling public shares privately to investors at a discount — often bad news for existing shareholders because it dilutes their current stake.

At the bank's suggestion, Mamma.com's CEO contacted Cuban to participate in the PIPE before it was made public, the filing asserts.

"The CEO prefaced the call by informing Cuban that he had confidential information to convey to him, and Cuban agreed that he would keep whatever information the CEO intended to share with him confidential," the complaint states.

As the conversation unfolded, Cuban allegedly became "very upset and angry" and told the CEO he didn't like PIPE deals.

"At the end of the call, Cuban told the CEO "Well now I'm screwed. I can't sell," according to the filing.

The CEO sent a follow-up email to Cuban, including contact information for the investment bank for more details on the private placement. Cuban called the bank's sales representative and allegedly had another "very upset and angry" conversation.

Just one minute after hanging up with the bank's sales representative, the SEC said Cuban called his broker and instructed him to "sell what you can tonight and just get me out the next day," the filing states. Cuban sold 10,000 of his 600,000 Mamma.com shares that evening, and the remaining 590,000 the next morning.

That evening, on June 29, 2004, Mamma.com publicly announced the PIPE offering.

On June 30, the first trading day after the announcement, Mamma.com stock price was down 8.5 per cent at $11.99 from $13.105 the previous day. It continued to decline over the next week, ultimately landing at $8 on July 8.

The SEC claims that by selling his Mamma.com shares before the public announcement, Cuban avoided losses in excess of $750,000. The commission adds that Cuban later publicly stated that he sold his Mamma.com shares because of the PIPE.

"We allege in the complaint, Mamma.com entrusted Mr. Cuban with nonpublic information after he promised to keep the information confidential," said Scott Friestad, Deputy Director of the SEC's Division of Enforcement in a statement. "Less than four hours later, Mr. Cuban betrayed that trust by placing an order to sell all of his shares. It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market."

We should note that in 2004 — when all this was allegedly happening — Mamma.com itself was being investigated by the SEC for stock manipulation after its shares spiked suspiciously for no apparent reason. The investigation later turned into a formal probe, but was dropped by the SEC in 2005. ®

High performance access to file storage

More from The Register

next story
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
prev story

Whitepapers

Designing a defence for mobile apps
In this whitepaper learn the various considerations for defending mobile applications; from the mobile application architecture itself to the myriad testing technologies needed to properly assess mobile applications risk.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.