Mark Cuban sued for Insider Trading

JD45 · Post #1 » by **JD45** » Mon Nov 17, 2008 4:29 pm

SEC just filed suit against him according to CNBC. No criminal charges at this point.

More to follow.

Post #2 » by **mojomarc** » Mon Nov 17, 2008 4:33 pm

Correction--they are charging him with insider trading.

Hawks · Post #3 » by **Hawks** » Mon Nov 17, 2008 4:46 pm

http://online.wsj.com/article/SB122693827604333637.html

This should get quite interesting.

BRIGGS · Post #4 » by **BRIGGS** » Mon Nov 17, 2008 4:52 pm

JD45 wrote:SEC just filed suit against him according to CNBC. No criminal charges at this point.

More to follow.

Looks much worse than Martha Stewart's deal and we know what happened to her. They both have the same loot so money won't get him off. I hope he's have fun with his 1-2 in the tank

mavsfoty · Post #5 » by **mavsfoty** » Mon Nov 17, 2008 4:57 pm

I know nothing about the business world and Wall Street. What the heck does all this mean?

JD45 · Post #6 » by **JD45** » Mon Nov 17, 2008 5:00 pm

mojomarc wrote:Correction--they are charging him with insider trading.

SEC is not criminal charges. They say "charge" but it is civil suit. Suing him for disgorgement and financial penalties. They could bar him from being a Director, but that is it.

Post #7 » by **catalyst** » Mon Nov 17, 2008 5:13 pm

Was it worth that piddling (For him) amount to go through this mess?

DreamShook34 · Post #8 » by **DreamShook34** » Mon Nov 17, 2008 5:16 pm

catalyst wrote:Was it worth that piddling (For him) amount to go through this mess?

thats what i was thinking.. less than a million bucks. dont go to jail for stealing stamps. Cuban could have taken the hit hes worth 2 billion.. i dont know how much he was worth when he did this. still stupid

mrmreg · Post #9 » by **mrmreg** » Mon Nov 17, 2008 5:20 pm

JD45 wrote:
mojomarc wrote:Correction--they are charging him with insider trading.

SEC is not criminal charges. They say "charge" but it is civil suit. Suing him for disgorgement and financial penalties. They could bar him from being a Director, but that is it.

You most certainly can be sent to the big house for insider trading. I don't know if it would be the SEC who'd send you there, but if he's found guilty, I doubt he gets off by paying a fine.

In these times where so many of us are feeling the pinch of these market returns, if a very public billionaire is found to have been scheming the system (not saying he did, 'cause how would I know), you can bet their will be politicians/judges lining up get him the max allowable penalty.

Reg

mrmreg · Post #10 » by **mrmreg** » Mon Nov 17, 2008 5:23 pm

catalyst wrote:Was it worth that piddling (For him) amount to go through this mess?

If he did it, do you think this is the only time he did?

mrmreg · Post #11 » by **mrmreg** » Mon Nov 17, 2008 5:25 pm

How long before we get a comment on this topic from Donald Trump? His brain is probably swimming with the possible shots he could take.

JD45 · Post #12 » by **JD45** » Mon Nov 17, 2008 5:27 pm

mrmreg wrote:
JD45 wrote:
mojomarc wrote:Correction--they are charging him with insider trading.

SEC is not criminal charges. They say "charge" but it is civil suit. Suing him for disgorgement and financial penalties. They could bar him from being a Director, but that is it.

You most certainly can be sent to the big house for insider trading. I don't know if it would be the SEC who'd send you there, but if he's found guilty, I doubt he gets off by paying a fine.

In these times where so many of us are feeling the pinch of these market returns, if a very public billionaire is found to have been scheming the system (not saying he did, 'cause how would I know), you can bet their will be politicians/judges lining up get him the max allowable penalty.

Reg

Yes, you can go to jail for insider trading. But so far, no criminal charges have been filed. And they probably won't. This is a new area for insider trading and he may very well prevail in court.

They allege he sold because he knew the company would do a financing, and that was going to make the stock go down. But if it was bad for the company, why did management choose to do it? Obviously management thought the financing was good for the company. I suspect lack of a financing would have moved the company to bankruptcy faster.

I am not a Mark Cuban fan, but this is not a strong case and could easily be thrown out by a judge before it ever goes to trial.

G.cracker · Post #13 » by **G.cracker** » Mon Nov 17, 2008 6:03 pm

Greed is Good.

Lava Rock Kid · Post #14 » by **Lava Rock Kid** » Mon Nov 17, 2008 6:42 pm

This news just made my day. LOL, This is gonna be a great week. All that money and no common sense. I guess he was right that the Kidd trade was a great trade.

mrmreg · Post #15 » by **mrmreg** » Mon Nov 17, 2008 6:49 pm

It wasn't that he knew they were doing to the offering. Everyone knew that, so that would not have been insider information. What's alledged is that he knew the offering was going to be done at less than the current market price (not a good thing) and so he hauled off and sold the other shares he already owned ahead of the offering. If they can prove he had direct knowledge of this, I would be shocked if criminal charges are not to follow.

I also wonder, even if he only were found guilty civily, where does that leave him with the NBA? Do they have any provisions that allow them to boot an owner who is found guilty of his sort of crime? After the whole ref thing last year, they can't want to have any part in this sort of press. I know this doesn't directly involve the NBA, but he's got to be about the most high profile owner in the league, so it still reflects on their integrity.

Post #16 » by **mojomarc** » Mon Nov 17, 2008 6:51 pm

JD45 wrote:
mojomarc wrote:Correction--they are charging him with insider trading.

SEC is not criminal charges. They say "charge" but it is civil suit. Suing him for disgorgement and financial penalties. They could bar him from being a Director, but that is it.

This isn't the same thing as a pure civil suit, though. They are suing him for violation of the law. The SEC is not empowered with pressing charges in criminal matters, so this suit is considered a charge for violation of the law. Criminal prosecution would come from the US DOJ if they determined that the actions crossed the threshold into criminal intent. So when you see this described as a civil suit, it is technically only because the Securities and Exchanges Act of 1933 does not empower the agency to actually push through criminal charges (even if it did, it would be of extremely dubious Constitutionality), so this amounts to the SEC saying legally that something criminal did indeed happen.

mrmreg · Post #17 » by **mrmreg** » Mon Nov 17, 2008 6:56 pm

mojomarc wrote:
JD45 wrote:
mojomarc wrote:Correction--they are charging him with insider trading.

SEC is not criminal charges. They say "charge" but it is civil suit. Suing him for disgorgement and financial penalties. They could bar him from being a Director, but that is it.

This isn't the same thing as a pure civil suit, though. They are suing him for violation of the law. The SEC is not empowered with pressing charges in criminal matters, so this suit is considered a charge for violation of the law. Criminal prosecution would come from the US DOJ if they determined that the actions crossed the threshold into criminal intent. So when you see this described as a civil suit, it is technically only because the Securities and Exchanges Act of 1933 does not empower the agency to actually push through criminal charges (even if it did, it would be of extremely dubious Constitutionality), so this amounts to the SEC saying legally that something criminal did indeed happen.

I knew there had to be a lawyer in the house somwhere.

Post #18 » by **mojomarc** » Mon Nov 17, 2008 7:00 pm

JD45 wrote:
Yes, you can go to jail for insider trading. But so far, no criminal charges have been filed. And they probably won't. This is a new area for insider trading and he may very well prevail in court.

What do you mean it is a new area? They're accusing him of violation of the SEC Act of 1933. This isn't a new area, but rather the oldest area there is--they are accusing him of having material non-public information and making a stock transaction based on that. Unless you set up a blind trust for selling shares at a pre-determined time prior to having specific material knowledge, once you come into possession of non-public material information you are not allowed to make a related stock transaction.

They allege he sold because he knew the company would do a financing, and that was going to make the stock go down. But if it was bad for the company, why did management choose to do it? Obviously management thought the financing was good for the company. I suspect lack of a financing would have moved the company to bankruptcy faster.

Whether the company made a good or bad business decision is irrelevant to the issue of Cuban's culpability. The issue at stake is whether or not he did indeed possess information that the offering would go off below publicly stated pricing levels and then sold prior to that announcement, which would have revalued the stock significantly.

I am not a Mark Cuban fan, but this is not a strong case and could easily be thrown out by a judge before it ever goes to trial.

We don't know based on the press release how strong the case actually is, but historically the SEC doesn't file charges lightly. If they have evidence that he indeed have the information 4 hours before he sold and prior to the information going public, they have him pretty dead to rights.

dirkforpres · Post #19 » by **dirkforpres** » Mon Nov 17, 2008 7:20 pm

Go Mavs

JD45 · Post #20 » by **JD45** » Mon Nov 17, 2008 7:41 pm

mrmreg wrote:It wasn't that he knew they were doing to the offering. Everyone knew that, so that would not have been insider information. What's alledged is that he knew the offering was going to be done at less than the current market price (not a good thing) and so he hauled off and sold the other shares he already owned ahead of the offering. If they can prove he had direct knowledge of this, I would be shocked if criminal charges are not to follow.

I also wonder, even if he only were found guilty civily, where does that leave him with the NBA? Do they have any provisions that allow them to boot an owner who is found guilty of his sort of crime? After the whole ref thing last year, they can't want to have any part in this sort of press. I know this doesn't directly involve the NBA, but he's got to be about the most high profile owner in the league, so it still reflects on their integrity.

All PIPE transactions are done at less than the current market price. The share sold are unregistered, so they can't be sold on the open market. Since they are not liquid, they are always worth less than shares registered for sale on the open market. Ultimately the company will register the shares so they can be sold, but that takes time.