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Mark Cuban Charged With Insider Trading

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  • by eldavojohn (898314) * <eldavojohnNO@SPAMgmail.com> on Monday November 17, 2008 @04:38PM (#25791263) Journal

    Something tells me that the billionaire blogger won't be talking about this one publicly any time soon.

    Are you crazy? Do you know how many page hits that would generate?! You don't know Mark Cuban. Of course, from his blog a few hours ago [blogmaverick.com]:

    "I am disappointed that the Commission chose to bring this case based upon its Enforcement staff's win-at-any-cost ambitions. The staff's process was result-oriented, facts be damned. The government's claims are false and they will be proven to be so."

    I'm not a lawyer. As for the case, I think this crap happens more often than you would like to think--the rich get richer, the poor get poorer. The fact that this occurred in June of '04 and he's being charged for it now implies that either it takes that long to build up evidence for a case or you don't hear about this until someone slips up. Also, I don't recall hearing the SEC drop charges or lose these cases very often so I'm pretty sure this guy is boned.

    • by wtansill (576643) on Monday November 17, 2008 @04:43PM (#25791337)
      Maybe he can get Martha Stewart's old cell. Should be a nice homey place...
      • by russotto (537200)

        Maybe he can get Martha Stewart's old cell. Should be a nice homey place...

        Don't think they're going to put Cuban in a women's prison. Anyway, Martha Stewart was not convicted of insider trading. She was convicted of lying to investigators.

        If Cuban's smart (and I suspect he likes to run his mouth too much), the only thing he's said to investigators is "My lawyer is _____, anything you want from me, talk to him".

        • by techno-vampire (666512) on Monday November 17, 2008 @05:22PM (#25792035) Homepage
          She was convicted of lying to investigators.

          Yes. She was convicted of lying to investigators when she wasn't under oath and hadn't been warned that what she said might be used against her. Not only that, what she lied about must not have been a crime because she was never charged with anything else.

          Now we know: never talk to the feds unless your lawyer's present, even if you don't think you've done anything against the law.

      • Lying about inside trading was more serious than the modest trading itself. However the the SEC stripped her of the right to be CEO and be on boards for the trading conviction. Was that permanent?
      • No Jail Time (Score:2, Informative)

        by Nixoloco (675549)

        According to the complaint [thesmokinggun.com] filed by the SEC, they are not seeking any jail time.

        They are seeking judgement:
        a. enjoining Cuban from engaging in future violations of the antifraud provisions of the federal securities law.
        b. ordering Cuban to disgorge, with prejudgement interest, the losses avoided as a result of the actions described
        c. ordering Cuban to pay a civil money penalty to pursuaint to Section 21A.... blah blah

        But.. no jail time. Martha Stewart received jail time because she was convicted of
        • by nabsltd (1313397)

          Since they don't want jail time, I can see why he wouldn't be worried even if he did do something wrong.

          Any fine is going to be pretty much a drop in the bucket for him. Sure, he won't like paying the $1-10M (based on his avoiding $750,000 in losses), but we won't see him on the street with a "will work for food" sign anytime soon, either.

    • by larry bagina (561269) on Monday November 17, 2008 @05:05PM (#25791739) Journal

      "Insider trading" can be very vauge and edge cases aren't clearly defined by statute or case law. Martha Stewart wasn't convicted of insider trading, she was convicted for obstruction of justice during the investigation (which might not have madei t to trial). If he shuts up, doesn't lie, and doesn't try to destroy evidence, he'll find it a lot easier to stay out of jail.

    • by erikina (1112587) <eri.kina@gmail.com> on Monday November 17, 2008 @05:11PM (#25791835) Homepage

      As for the case, I think this crap happens more often than you would like to think--the rich get richer, the poor get poorer. The fact that this occurred in June of '04 and he's being charged for it now implies that either it takes that long to build up evidence for a case or you don't hear about this until someone slips up.

      As a hobbiest stock trader, I can tell you with confidence that inside trading happens a hell of a lot. Theres billions of dollars to be made. In fact, it happens so much - that there are many technical-trading techniques used to "follow the insiders". So every so often they find an inside trader, chuck him in jail and try make everyone happy. I'd much prefer if the government just got it's nose out of the market. The only thing insider traders do is lead to a more accurate market..

      • As for the case, I think this crap happens more often than you would like to think--the rich get richer, the poor get poorer. The fact that this occurred in June of '04 and he's being charged for it now implies that either it takes that long to build up evidence for a case or you don't hear about this until someone slips up.

        As a hobbiest stock trader, I can tell you with confidence that inside trading happens a hell of a lot.

        The company I work for encourages me to buy its shares. If that is not insider trading I don't know what is.

        • by SomeJoel (1061138)
          If the advice is ALWAYS "buy", then it is not insider trading. You aren't making your decisions based on any inside knowledge - in fact, you aren't making decisions at all, since you are always buying.
        • by KillerBob (217953) on Monday November 17, 2008 @07:02PM (#25793889)

          The company I work for encourages me to buy its shares. If that is not insider trading I don't know what is.

          That's not insider trading. It may or may not even be stock options. The company I work for (one of the top 3 computer companies in the world) also encourages us to buy their stock, and offers stock options to its employees. They also require we take annual training on business ethics, and that we understand exactly what constitutes insider trading. There's even a question on the final exam of said training dealing specifically with when it would be unethical to purchase stock.

          Knowing the general scuttlebutt around the company for how we're doing doesn't give me inside information. Pretty much the whole world knows which markets we're leading, and wich markets we're behind in. If somebody on the front lines is buying stock, they probably don't know anything more about the company than the public at large. We have another category entirely of employees, however... people who are windowed. Those people are given a window in which they are allowed to buy/sell company stock, and periods when they are not allowed to buy.

          An example of when a windowed employee would not be allowed to buy would be, say, after our sales figures for the last quarter have been tallied, but before they have been published. People in the upper echelons of the company will know this information, and would be able to predict how their announcement will affect our stock market. With this in mind, they can react accordingly. This, in turn, would allow them to buy a bunch of stock before a sudden spike, or dump a bunch of stock before it falls. That is insider trading.

          Insider trading is illegal, because it gives those people an unfair advantage over the rest of the world. That's why we have windowed employees... if you're in a position where insider trading is possible, you're told when not to buy/sell stock so that you can't be accused of it.

      • The stock market was designed to allow more or less normal (though mostly rich) people invest for the future in companies without having to take full responsibility for that and risk their freedom in something that they don't understand. The trade off is that they have to have limited knowledge about and control of the company (because if they do understand and control the company they could use it as cover for doing illegal things without responsibility).

        Insider trading completely breaks those assumption

        • Re: (Score:3, Interesting)

          by erikina (1112587)
          That's crap on so many levels. But first, let's get you off your moral high-horse. Let's say you have a $100k worth of Intel stock (from super, or w/e retirement plan you have in your area). So anyway, you always Intel was a pretty solid stock, and got along with some Intel people.

          Now let's say you're knocking back a few beers with your Intel buddy, and he tells you the i7 CPUs are failing en masse, the management is crumbling and AMD is poised to deliver a fatal blow. So in short, you are now in possessio
          • Re: (Score:2, Funny)

            by mr_lizard13 (882373)
            Holy shit, the i7 CPUs are failing en masse??!

            They've only just come out!
            • Re: (Score:3, Funny)

              by k33l0r (808028)

              Holy shit, the i7 CPUs are failing en masse??!

              YES, Sell, sell, sell. You should do what I do: base your trading on rumours you hear on Slashdot.

          • The smart investor has contingency orders or even chains of orders in place to be executed immediately when triggered by certain events (such as a precipitous and sudden drop in price below a certain threshold). Although this will not completely protect an investment which is falling like a rock from losing value it does provide some measure of protection against bad news without being insider trading. It is also possible to purchase derivatives which insure against a loss in exchange for regular premiums s
            • by erikina (1112587)
              I'm not sure what you're getting at.

              I've used that sort of stuff regularly, but things like stop-loses (selling as the stock goes down) is counter beneficial in this sense.

              The reason: The news is always released during non-trading hours. So as soon market opens again, it has already made that adjustment. So that's why it's not effective. And why it's actually counter-beneficial .. because the the order will sell your shit as soon as the market opens. That's when all the panic selling occurs. I find tha
              • No fancy trading will ever come close to insider trading my friend.

                I get your point, and agree,but...front-running will give some insider trading a run for it's money. I actually see it as a form of insider trading, but, technically, it is a different crime, or at least, 'label' for an activity leading to the same crime (fraud).

                When you mentioned, early in your post, about the lunch hour 'lull', had to laugh, because that's what reminded me of front-running.

                Lunch hour at Broad & Wall is the best time t

          • Now let's say you're knocking back a few beers with your Intel buddy, and he tells you the i7 CPUs are failing en masse, the management is crumbling and AMD is poised to deliver a fatal blow. So in short, you are now in possession of insider information. So the question is, would you sell your stock or wait till you lose it?

            First, if things were that bad, it wouldn't be insider trading because a large number of people would know (orders not getting fulfilled, OEM returns, industry reports). Second, if your

        • Let's not forget another SEC clusterf**k that causes endless grief to cash (non-margin) investors (especially newbies)... the "1+3 rule".

          When you buy shares of stock, the funds are gone from your trading account the instant your order gets fulfilled. But as far as the SEC is concerned, you haven't actually "paid" for the shares until the close of the day's trading, and don't actually OWN the shares until the third business day after the trade.

          Why is that a problem? Because the SEC ALSO prohibits cash trader

      • I'd much prefer if the government just got it's nose out of the market. The only thing insider traders do is lead to a more accurate market..

        Just want to be sure I understand. If you were making an equities market, you don't see the value of trying to have a level playing field for information, where all those who would trade an equity have the same information about it (or, if insiders, they'd have some rules on how they can trade)...

        Sort of like the SNL all drug olympics [broadcaster.com], right? Ah, I kid. :D

        But for serious now, am I supposed to be happier about investing in your insider-trading-friendly market, versus one that does make an attempt to be trans

        • by erikina (1112587)

          Just want to be sure I understand. If you were making an equities market, you don't see the value of trying to have a level playing field for information, where all those who would trade an equity have the same information about it (or, if insiders, they'd have some rules on how they can trade)...

          A bit of a loaded question. If I could magically ensure information symmetry, I would. But I believe trying to enforce this level-playing-field idea is ridiculous. We're barely making a dent in "the problem", just enough to make it more profitable for those that do. Not only that, but we're throwing people in jail for doing something 99.9% of us would do..

          Sort of like the SNL all drug olympics [broadcaster.com], right? Ah, I kid. :D

          :P but yeah, equity markets serve quite a different purpose than sporting events :P

          But for serious now, am I supposed to be happier about investing in your insider-trading-friendly market, versus one that does make an attempt to be transparent?

          Of course not. I too would be more hesitant, but the purpose of the sto

          • by Concern (819622) *

            But for serious now, am I supposed to be happier about investing in your insider-trading-friendly market, versus one that does make an attempt to be transparent?

            Of course not. I too would be more hesitant, but the purpose of the stock market isn't designed as a form of entertainment.

            Well, I am always entertained by the sight of suckers losing money. :D That said, I think if you hesitate less to buy in the more regulated market, and so do I, and so do most people, then governments end up regulating markets in this way, because who doesn't want more capital. :)

            People that give false information to "outsiders" to take advantage of them have never worried about insider trading laws. They will continue to operate as usual, and we already have laws and regulation in place to deal with that.

            You are right of course. We can't stop all crime, but we do prefer to live in the regions of the world where they try. :)

            Good point, but this is more correlation than causation. A country that can afford to regulate, is clearly better off.

            Touche. I personally believe such regulations are causative, but I suppose proving it to you will be difficult

            • by erikina (1112587)
              Thank you for the civilized discourse. :)
              It's one of those topics that not many people seem capable of thinking straight about it.

              I met a man Rene Rivkin [wikipedia.org] who seemed to love what he did (stock trading) and we talked about a mobile device he carried around for constant stock feeds (I believe he called an "Orange" or something). Anyway, he later was found to have made $2,000 with some insider knowledge, was sentenced to jail, lost his license all which ultimately led to his suicide.

              And when you disagree w
              • by Concern (819622) *

                My pleasure.

                I hadn't heard of Rene Rivkin. Thank you for sharing the story.

                But then again, I'm also against crap like the "war on drugs" for similar reasons (un-enforceability and the result of trying to).

                Touche again. For some ideals, we must try and fail. For others, we should not try at all. Then again I'm not sure prohibition (especially against certain drugs) is even an ideal.

                For white collar crime, I grow exceedingly weary of the American double standard - where lowly proletarian criminals do years of hard time for stealing a stereo, versus the feather delicate touch of the law on those who commit financial crimes, often of vast

                • by erikina (1112587)

                  For white collar crime, I grow exceedingly weary of the American double standard - where lowly proletarian criminals do years of hard time for stealing a stereo, versus the feather delicate touch of the law on those who commit financial crimes, often of vastly greater magnitude.

                  I hear the same thing everyday from the business community, except about the comparative lax proletarian crime enforcement. I guess it depends what side of the fence you stand on.

                  On my list: Government corruption. Every branch of the government is corrupt. Every big deal that goes down seems to have kick-backs going everywhere. And it's getting to the point, that the average person is starting to notice it. When you give these people a sanctioned monopoly on power, it's going to get abused. Even if it'

            • by erikina (1112587)

              Well, I am always entertained by the sight of suckers losing money. :D

              Reminds me of when I was at the casino, watching the "high rollers" at their baccarat tables playing with stacks of $250 and $500 chips. I figure this must sort of skill game, and they must be doing it professionally. But reading the casino provided rule book, it's pretty clear it's just a game of chance where the house is constantly scraping a couple percent.
              Maybe I'm a little sick, but there was something satisfying about watching them reluctantly pull out their wallet and buy another grand of chips.

      • I'd much prefer if the government just got it's nose out of the market. The only thing insider traders do is lead to a more accurate market..

        More accurate? The accuracy ends up being the same in the long run as the information eventually gets out to the public. Profiting with inside trading is accomplished through short-term inaccuracy, where the market is unable to regulate to the correct price before a few individuals have gamed the system. So not only do a few people profit, you get an increase in ec

        • by erikina (1112587)

          Profiting with inside trading is accomplished through short-term inaccuracy, where the market is unable to regulate to the correct price before a few individuals have gamed the system.

          Exactly. Think about it. The individuals that have "gamed the system" have done so, helping to close the "short-term inaccuracy". Consider it arbitrage trading, and they're closing the perceived and actual value of a company gap.

          This all happens before the knowledge is public, leading to a more *accurate* market/evaluation.

          • Exactly. Think about it. The individuals that have "gamed the system" have done so, helping to close the "short-term inaccuracy". Consider it arbitrage trading, and they're closing the perceived and actual value of a company gap.
            This all happens before the knowledge is public, leading to a more *accurate* market/evaluation.

            Because this happens before knowledge is public, you have less accuracy because the market as a whole doesn't have time to digest all the information to identify what the new value shoul

    • by MarkRose (820682)

      the rich get richer, the poor get poorer

      That's because the rich invest the time to learn how to generate wealth and then do it. It's a skill almost anyone can learn. Those who don't simply have other priorities. We still live in a mostly free society in western world. It's one thing to be starving on the streets, but anyone who has enough money to have a tv and the time to watch it has all the resources they need to become wealthy.

      The other reason why the poor get poorer is because of fiat currency and frac

      • Inflation is a tax [lewrockwell.com] on the middle and lower class.

        Bingo! That is exactly correct and beginning in the mid 1960s and continuing on through the early to mid 1980s that was a very serious tax indeed which was compounded and made even worse for the middle class by the relative stagnation of wages as compared to that inflation from about 1978 onwards. This is one of the main reasons why the children of the boomers (generation X) and their children (generation Y) are having a harder time achieving the levels of prosperity that the boomers did when they were that

    • by barc0001 (173002)

      Actually, I'm not a betting person myself, but in this case I would bet that he is anything BUT boned. Why? Because it just never looks good on the SEC's part to have a loose cannon send an email like this one [nytimes.com] to an intended suit target, especially BEFORE the suit is filed. Makes it look like the suit is retaliation, not an actual case.

    • by Newer Guy (520108)
      Looks like he might be 'dancing with the stripes' instead of the stars soon!
  • by circletimessquare (444983) <circletimessquare AT gmail DOT com> on Monday November 17, 2008 @04:41PM (#25791303) Homepage Journal

    for all i can tell, the guy registered "broadcast.com" in the 90s, created a pretty business plan, and sold out for billions at exactly the right time, and bought a basketball team

    i applaud his timing and his luck and success, but i haven't the faintest idea as to why anything this guy ever did is of any interest to slashdot

    • It's easy. The Netspeak translation would be:

      Mark Cuban is a Troll IRL.

    • Re: (Score:2, Informative)

      by fprintf (82740)

      I've never been able to figure it out, and in fact didn't know why he was famous until you mentioned broadcast.com (a place I have never been). Billions for that?

      I only saw his reality show, and learned from that show that he owns a basketball team. Otherwise, you are right. Why should we care? He made billions, meanwhile his company (I believe acquired by Yahoo! since broadcast.com redirects there) no longer exists and the parent company is in financial trouble itself. Got out at the right time is an unde

    • Re: (Score:3, Informative)

      by netsavior (627338)
      let me rephrase your comment to explain:

      Why would a bunch of nerds be interested in a guy that made a BILLION DOLLARS doing something nerdy?
      • Re: (Score:3, Funny)

        by billcopc (196330)

        Ya but he didn't do anything nerdy. He's just another MBA asshat like all the other people we've been taught to despise. His only claim to fame is playing the stock game, and poorly at that. He just got reeeeeeeeally lucky.

        The main difference between Mark Cuban and the Powerball winners, is Mark Cuban was born with his ass where his mouth should be.

      • making billions doing nerdy things

        mark cuban: making billions. but not doing a single nerdy thing

    • by billcopc (196330)

      i haven't the faintest idea as to why anything this guy ever did is of any interest to slashdot

      Your summary of his life's contributions is accurate, but this is Slashdot. We lost all the good editors years ago, so this garbage is all we get anymore.

    • by Eil (82413)

      He's a venture capitalist who puts up a lot of money for technology, products, and companies that make Slashdot headlines.

    • by TheSync (5291)

      or all i can tell, the guy registered "broadcast.com" in the 90s, created a pretty business plan, and sold out for billions at exactly the right time, and bought a basketball team

      Mark was definately a pioneer in early webcasting. AudioNet really made RealAudio popular. RealAudio was the first usable streaming audio system available to most unicast dial-up Internet users.

      As Wikipedia sez:

      "Cuban started a company, MicroSolutions, with support from his previous customers from Your Business Software. MicroSol

  • by HerculesMO (693085) on Monday November 17, 2008 @04:44PM (#25791353)

    I wish *I* could be charged with insider trading.

    It would mean I'm worth it enough to go after :(

    • No, it would mean that you are famous enough for people to pay attention while the real criminals get away with whatever they were doing.

      Such as the FED recently giving away $2 trillion and won't disclose who they gave it to. Or the fact that half the $700 billion bailout has been given away with zero transparency.

      Mark Cuban is just a public scapegoat, just as Stewart was.

  • Summary is incorrect (Score:5, Informative)

    by paulthomas (685756) on Monday November 17, 2008 @05:08PM (#25791793) Journal

    Mamma.com took a private investment at a discount (a PIPE [wikipedia.org]). This is a sign of weakness, and the announcement sent the shares lower. The SEC alleges that Mr. Cuban sold his shares with insider knowledge of the PIPE, liquidating his stake before it got battered the next day.

    WSJ article [wsj.com] (report updated since I saw it earlier; it now erroneously says it was an investment in a private company).

    • by neoform (551705)

      and to think, he did this illegal trade to save himself about $300,000..

      what a dumbass.

  • Twice now (Score:5, Interesting)

    by fishbowl (7759) on Monday November 17, 2008 @05:37PM (#25792341)

    Twice in my career I have had a good laugh at the expense of someone whose abuse I suffered.

    The first was David Duncan. He was a senior finance/accounting manager when I was a peon at Mobil. I basically had to jump at his every request even though I never worked for him or his department. I left that job to start an internet business, but I really enjoyed the day that I saw David Duncan testifying before Congress, explaining Enron to them. Beautiful day.

    The second is today. When my internet company was encoding and streaming his sports and talk radio broadcasts (innovative for 1994, mind you), Mark Cuban used to page me and call me at home at all hours with the most unreasonable demands and questions. Now I realize if I had been willing to kiss his ass the way he was accustomed to being kissed, I might be a billionaire today, but it would never have happened. Today I am all smiles.

  • ...in the private corrections firm which will be accommodating him?

  • http://www.businessassociationsblog.com/lawandbusiness/comments/the_insider_trading_charges_against_mark_cuban/ [businessas...nsblog.com]

    This was written by a Law Professor. Basically it boils down to the SEC has to really stretch current law to cover this situation.

    It appears the CEO of Mamma.com knew that several of their original investors, specifically Mark Cuban, would be upset by the release of more stock, diluting his original investment. The CEO might have told Mark about the investment in an attempt to keep him from
    • Re: (Score:3, Interesting)

      by CodeBuster (516420)

      If you are a stockholder in a company, can the SEC consider you an insider under the law if an insider calls you and asks you to keep a secret?

      So don't take his call or simply say, "La, La, La...I'm not listening!" when he tries to give you insider information.

    • Mark was a minor stockholder (6.3%) and didn't meet any of the other legal standards (fiduciary responsibility to the company) to be considered a traditional insider.

      This case had nothing to do with Cuban being an insider. It is about Cuban (the Tippee) trading on a tip from the CEO (the Tipper).

      Anyone - no matter how much or how little stock he owns - may not trade on insider information, you, me, Rob Malda. This is known as "tippee" liability. And it's exactly what got Martha Stewart in trouble (a
  • If you RTFA you find "The Commission's complaint seeks to permanently enjoin Cuban from future violations of the federal securities laws....". So am I to understand that part of Mark Cuban's "punishment" is that in the future he will not be allowed to violate the same laws that everyone else is already expected to not violate?
  • Requires less time in prison. http://www.insidetraderapp.com/ [insidetraderapp.com]
  • I recently had a mind-blowing conversation with the new maintenance guy. He's got one of those macho, forceful personalities that can't withstand criticism or anything against what he 'knows'. (Actual conversation. I wrote it down after to keep it fresh.)

    Anyways, we were talking about the internet. He says "I read the internet all the time. I keep up on all the news. "

    Then he says "You know those two Google guys are gay right?"

    I say "Well, one is married and the other is about to be married. So unless they'

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