Billionaire Mark Cuban lost his bid for a court order ending a U.S. Securities and Exchange Commission lawsuit that accuses him of insider trading.
The regulator sued in 2008, accusing the owner of the National Basketball Association’s Dallas Mavericks of illegally selling his stake in the Internet search company Mamma.com Inc. in June 2004 after gaining insider information from its then-chief executive officer, Guy Faure.
Cuban had argued that the SEC failed to show he promised to keep confidential information he had obtained from Faure. U.S. District Judge Sidney Fitzwater in Dallas heard arguments in the case on Jan. 18.
“Although the question whether Cuban is entitled to summary judgment is in some respects a close one, the court concludes that the SEC is entitled to present its case to a jury,” Fitzwater said in a ruling issued today.
The SEC claims Cuban, upset upon learning of Mamma.com’s imminent plans for a below-market private placement, sold his 6.3 percent stake for about $7.9 million within hours after talking to Faure, avoiding a $750,000 loss.
Mamma.com fell 8.5 percent on June 30, 2004, the first trading day after the private placement was announced, and 15 percent the day after the investor’s sales were disclosed in a regulatory filing made public on July 2, according to data compiled by Bloomberg. The Montreal-based company is now known as Copernic Inc.
SEC attorney Kevin O’Rourke opposed Cuban’s summary-judgment motion at the January hearing, citing the parties’ disagreement about the underlying facts.
“It’s an inside-information case, it’s a misappropriation case. It deserves to have a jury trial,” O’Rourke said then.
Attorney Stephen Best, who argued for Cuban before Fitzwater, didn’t immediately respond to a phone message seeking comment on the ruling. Best is a partner in the Washington office of Brownstein Hyatt Farber Schreck LLP.
The case is Securities and Exchange Commission v. Cuban, 08-cv-02050, U.S. District Court, Northern District of Texas (Dallas).