17 Oct Mark Cuban: Not Guilty of Insider Trading

A Dallas jury has ruled that billionaire Mark Cuban was not guilty of insider trading of stock of Momma.com back in 2004. The SEC had alleged that Cuban agreed in a phone call with the Company’s CEO to keep information about a pending stock offering confidential. The CEO even claimed that Cuban complained on the call about not being able to sell his stock now that he possessed “insider” information. Yet he sold his whole stake anyway right after the call.

The problem: the jury apparently didn’t believe the CEO’s version of the phone call. Cuban said simply he couldn’t recall the conversation from 9 years ago. The CEO’s credibility was somewhat put in doubt because (a) he didn’t appear in court in person, only by video and (b) he had changed his story at least once in the SEC’s favor, right after the SEC dropped a different case against his company.

For his part, Cuban railed into the SEC after the decision, claiming their “process is broken.” There is a saying that, “Hard facts make bad law.” This may be one of those. Rather than being some sort of leading case on insider trading, it looks like this one just goes down as a rare SEC failure at trial where maybe the celebrity aspect got a little out of control.