SEC v. Mark Cuban Lives On

[WSJ_law_blog]

One can only imagine what dark thoughts cloud the mind this morning of Mark Cuban.

Less than three months ago the Securities and Exchange Commission’s insider trading case against the NBA bad boy was dismissed.

Yesterday, though, the SEC decided to press on, filing a notice that it will appeal a July ruling by Dallas federal judge Sidney Fitzwater. Here’s a WSJ story on the latest development in the case and one from WashPost.

To recap, the SEC alleges that in 2004 Cuban was informed by the chief executive of Mamma.com, a company in which Cuban held a substantial amount of stock, that the company would raise money by issuing low-priced shares, a move that would probably hurt the value of Cuban’s shares. Cuban then allegedly sold his stake before the share offering became public, avoiding $750,000 in losses.

Cuban has denied the charges, with trademark vigor, and he has so far had the upper hand. (We posted here about how Cuban had written his own blog item, questioning the SEC’s case.)

In his July ruling, Judge Fitzwater said Cuban would be liable for insider trading only if he specifically promised not to trade shares. The SEC had no case, the judge ruled, because it never alleged Cuban made such a promise.

The judge dismissed the complaint “based on the SEC’s own version of the facts,” Cuban’s lawyer, Stephen Best, told WSJ.

“Not only did the SEC lose on the law, but … the SEC could never have won on the actual facts,” he said. “This appeal is nothing more than the SEC’s desperate attempt to shock a heartbeat into a case that was dead on arrival.”

SEC spokesman John Nester said: “We believe the District Court erred in dismissing our complaint and we look forward to presenting our position to the Fifth Circuit Court of Appeals.”