SEC Slaps Mark Cuban with Insider Trading Charge

From ClusterStock, Nov. 17, 2008:

An SEC announcement alleges that Mark Cuban was informed of an impending stock offering at Mamma.com, and that within hours of learning of it, he dumped his stock:

The Commission's complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that in June 2004, Mamma.com Inc. invited Cuban to participate in the stock offering after he agreed to keep the information confidential. The complaint further alleges that Cuban knew that the offering would be conducted at a discount to the prevailing market price and that it would be dilutive to existing shareholders.

Within hours of receiving this information, according to the complaint, Cuban called his broker and instructed him to sell Cuban's entire position in the company. When the offering was publicly announced, Mamma.com's stock price opened at $11.89, down $1.215 or 9.3 percent from the prior day's closing price of $13.105. According to the complaint, Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the offering.

As CNBC just noted, Mark Cuban certainly has a knack for timing, noting his impeccably timed sales of Broadcast.com, and wise decision to dump his Yahoo shares. We have no idea what his side of the story is, and we'll give him the benefit of the doubt until proven otherwise. But just as a general rule, if your inclination is to defend someone by asking: Would they really have been this stupid? The answer might surprise you.

The SEC's actual complaint is here (.pdf), and it notes that it's seeking a penalty and disgorgement of gains, but doesn't say anything about seeking jail.