A Texas federal jury took less than four hours to reject the SEC‘s claim that the sports and media entrepreneur, and star of ABC’s Shark Tank, had engaged in insider trading in 2004 when he sold his stock in Canadian search engine Mamma.com. “The SEC regulates through litigation, and that’s its own problem,” Dallas Mavericks owner and investor Mark Cuban said at a news conference after the decision was announced. “This is a horrific example of how the government does work.” The government said that Cuban broke the law — and saved himself $750,000 in potential losses — when he made the sale after Mamma.com CEO Guy Faure told him that he planned to dilute the public shares with a private stock offering. The SEC said Cuban had promised to keep the information secret; the exec said he made no such vow. Jurors had to sort through that question, and whether — if Cuban had made a promise — it also meant that he couldn’t sell his stock. The trial started September 30, just 10 days after Shark Tank returned for a fifth season. The decision today to side with the billionaire who controls cable network AXS TV, Landmark Theatres, Magnolia Pictures, and the the NBA team is a setback for SEC Chair Mary Jo White’s effort to show that her agency can effectively attack white-collar crime.
For one side or the other, it looks like a Shark is going to take the stand in his own insider trading trial this fall. Both Shark Tank judge Mark Cuban’s lawyers and attorneys for the U.S. Securities and Exchange Commission late last week named the entrepreneurial reality series judge as a witness in the upcoming trial. The trial is set to start on September 30 in Texas, 10 days after Season 5 of Shark Tank debuts. Cuban was one of six “will call” individuals named by the SEC (read it here). After naming seven certain witnesses, the Dallas Mavericks and AXS TV chairman’s lawyers said “Mr. Cuban may call the following witnesses if the need arises” including himself in the list of eight (read it here). The federal court trial emerges out of the federal government’s contention that on June 29, 2004 Cuban avoided more than $750,000 in losses by selling 600,000 shares in search engine Mamma.com Inc. The sale allegedly came the day after the CEO of the Canadian-based company confidentially told Cuban that a planned public equity offering on June 29 would dramatically dilute the worth of his stock. Cuban made the sale before the announcement and the nearly 10% drop in the company’s share price. The billionaire denied the charges, saying it was all above board and public.