The Securities And Exchange Commission (SEC) has charged HDNet founder Mark Cuban with insider trading.
The SEC alleges that the flamboyant billionaire and owner of the Dallas Mavericks basketball team sold 60,000 shares of internet search engine Mamma.com after he received confidential information about an imminent stock offering.
According to the official complaint Montreal-based Mamma.com approached Cuban in June 2004 to take part in a private placement stock offering after he agreed to keep the information confidential. The company sought to raise capital by offering investors like Cuban the chance to buy more shares at a discounted rate.
However Cuban knew the offering would dilute the holdings of existing shareholders and instructed his broker to sell whatever shares in Mamma.com he could. Share prices tumbled 9.3% after the offering was announced. The SEC said Cuban avoided losing $750,000 by selling his investment.
'Mamma.com entrusted Mr Cuban with nonpublic information after he promised to keep the information confidential,' Scott W Friestad, deputy director of the SEC's enforcement division, said 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.'
Speaking through his lawyers on his website, Cuban said the complaint lacked merit as the result of procedural misconduct and added he would fight the charges.
The SEC alleges that the flamboyant billionaire and owner of the Dallas Mavericks basketball team sold 60,000 shares of internet search engine Mamma.com after he received confidential information about an imminent stock offering.
According to the official complaint Montreal-based Mamma.com approached Cuban in June 2004 to take part in a private placement stock offering after he agreed to keep the information confidential. The company sought to raise capital by offering investors like Cuban the chance to buy more shares at a discounted rate.
However Cuban knew the offering would dilute the holdings of existing shareholders and instructed his broker to sell whatever shares in Mamma.com he could. Share prices tumbled 9.3% after the offering was announced. The SEC said Cuban avoided losing $750,000 by selling his investment.
'Mamma.com entrusted Mr Cuban with nonpublic information after he promised to keep the information confidential,' Scott W Friestad, deputy director of the SEC's enforcement division, said 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.'
Speaking through his lawyers on his website, Cuban said the complaint lacked merit as the result of procedural misconduct and added he would fight the charges.
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