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by Vault Law Editors | November 18, 2008


Yesterday, billionaire blogger Mark Cuban was charged with insider trading in a civil suit filed by the SEC. Cuban is alleged to have sold shares of Google wannabe internet search company ("The Mother of All Search Engines") just before its share price fell, thereby saving himself a $750,000 loss.* The complaint alleges that Cuban acted on the knowledge that an impending offering by would dilute the share value of existing shareholders, himself among them.

The redoubtable Professor Bainbridge takes a look at the charges and concludes that the SEC has a "pretty good case" which hinges on whether it can be proven that Cuban assumed a fiduciary obligation of confidentiality regarding The professor concludes with this bit of editorializing:

I suspect it was not greed but rather his legendary temper that did him in. The PIPE transaction planned would have involved the issuance of new shares at a below market price. It would have diluted the economic value and voting rights of Cuban and the other pre-PIPE investors. The complaint makes clear that Cuban was furious about the planned sale. His anger led him to a rash act, which now could result in serious civil fines.

Cuban's defense is in the hands of Ralph Ferrara of Dewey & LeBouef.  

*A little perspective:  Cuban, in his capacity as owner of the Dallas Mavericks, once was fined $500,000 by the NBA for saying that he would not hire the league's chief official to "manage a Dairy Queen."

-posted by brian 

UPDATE: "My brother is not Martha Stewart"


Filed Under: Law