Securities- Insider TradingInstead of expecting to spot Mark Cuban courtside at a Dallas Mavericks game this week, anticipate seeing him in federal court in front of a jury.

SEC vs. Mark Cuban

The U.S. Securities and Exchange Commission (SEC) has brought a civil insider trading lawsuit against Mark Cuban which will be tried in front of District Judge Sidney Fitzwater.

The SEC has accused Mark Cuban of insider trading for allegedly selling his 600,000 shares (or his 6.3% stake) in after the CEO of the company informed him on June 28, 2004 of an equity offering.  This basically means that the internet search company was “planning a private stock offering” that would reduce’s stock price.  Sources have reported that by selling his shares in Cuban apparently avoided losing $750,000.

According to Reuters, Cuban alleged that “he had no obligation not to trade, and that there was no evidence that the information he had was confidential or material."

Cuban Supposedly Wants Vindication from the SEC:

The SEC wants to penalize Cuban by recovering the alleged illegal gains, by imposing a fine, and by banning similar conduct for his alleged violation of the SEC rules.  According to several sources, Cuban could have probably settled with the SEC for about $2 million. Of course, this amount is chump change in comparison to Cuban’s actual worth, as he is reportedly worth nearly $2.5 billion.  So why has he been fighting the SEC for almost five years?  According to sources, Cuban is apparently going forward with this lawsuit out of his need for vindication.  Clearly, his competitive nature doesn’t only remain courtside.

What Is Insider Trading?

Insider trading occurs when an individual has knowledge of material information about a company and trades or sells his or her shares to obtain a benefit.  Click to learn more about insider trading and securities fraud.

If you are interested in following this case, the name is SEC v. Cuban, U.S. District Court, Northern District of Texas, No. 08-02050.