Basketball season may not have started yet, but already the Dallas Mavericks have picked up one victory: in the courtroom. Billionaire Mavericks owner and investor Mark Cuban has been found not guilty of accusations that he previously engaged in insider trading when selling his shares of an Internet company in 2004.
A Texas federal district court ruled that the Securities and Exchange Commission (SEC) could not adequately prove crucial parts of its case, including the allegation that Cuban had agreed to keep certain information given to him confidential.
“Hopefully people will start paying attention to how the SEC does business,” Cuban told a crowd of reporters outside the courthouse. “I’m the luckiest guy in the world. I’m glad this happened to me. I’m glad I’m able to be the person who can afford to stand up to them.”
In 2004, Cuban sold 600,000 shares of the website Mamma.com just before the website announced a private placement of shares. At the time, Cuban was the primary investor in the company, holding 6.3 percent of all its shares. After a June 2004 conversation with Mamma.com CEO Guy Faure, in which Faure asked Cuban to participate in a new offering that would dilute the company’s shares by 8.5 percent, Cuban’s brokers sold all his shares to avoid a $750,000 loss.
The government believed that phone conversation amounted to insider trading. However, Cuban consistently maintained his innocence and attacked Faure’s credibility in court. The strategy worked. “We believe we did the best we could in this case, and things turn out the way they turn out,” Cuban’s lead attorney, Jan Folena, said.
Former SEC enforcement lawyer Jeffrey Ansley told the Associated Press that the quick decision in the case was a condemnation of the SEC’s attempted litigation strategy. “The SEC lost every place where they could have lost, and because of that, this has to impact how the SEC staff decides which cases to bring,” Ansley said.