Mark Cuban insider trading trial set to start

http://money.cnn.com/2013/09/30/investing/mark-cuban-insider-trading-trial/index.html?hpt=hp_t2

by evo_9 • 13 years ago

31 23 13 years ago

money.cnn.com

ryankshaw• 13 years ago

from the article: if he looses "He can be forced to pay a fine" (but does not specific fine amount) and that he sold the shares "avoiding a $750,000 loss on the holding". I wonder how much, if he does end up loosing, the fine will be. My bet is that, even in the worst case, it will be less than the certain 750K loss he knew was coming.

jbigelow76• 13 years ago

They could try and make an example out of him purely for show purposes. Most banking execs appear to be getting away with (financial) murder, but Mark Cuban isn't juiced in with government like the bankers are. He may take a hit so the feds can make us, the unwashed masses, believe that even the billionaires will be held accountable.

rayiner3• 13 years ago

If found liable (this is a civil action), at least it will be easy to articulate exactly what if anything he did wrong. Can you say that about the banking execs?

The SEC doesn't avoid people who are "juiced in" to the government. It prosecutes cases it can win. Bankers spend a lot of time figuring out where the line is and staying on the right side of it. To the extent they do anything wrong, prosecuting them involves getting a jury to understand reserve ratios and risk models and other things they won't understand. But insider trading is easy to understand. He had this insider information, and did this trade that saved him $750k. I can explain that to grandma. Its easy. Which is why bankers don't get caught doing it, but less plugged in people do.

siegecraft• 13 years ago

I'm pretty sure they're already trying to make an example out of him for show. If I remember correctly, this first popped up right after Cuban announced BailouthSleuth.com

jbooth• 13 years ago

He's not only less connected, but a loudmouth, too. You can't have people just piping off, saying whatever they want.. what kind of example does that set?

selmnoo• 13 years ago

(You mean 'losing' not 'loosing', please fix comment so I can delete this comment :))

sokoloff• 13 years ago

Disgorgement of increased profits (or reduced) losses is a typical civil remedy offered by the SEC in such cases.

Securities Exchange Act of 1934, §§ 78u-2(e) and 78u-3(e).

78u-2(e): Authority to enter order requiring accounting and disgorgement: "In any proceeding in which the Commission or the appropriate regulatory agency may impose a penalty under this section, the Commission or the appropriate regulatory agency may enter an order requiring accounting and disgorgement, including reasonable interest. The Commission is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection."

78u-3(e) is similar.

http://en.wikipedia.org/wiki/Disgorgement_(law)

The (presumed) intent is to remove the incentive for others to do this, which a fixed or capped fine would not accomplish (as you observed).

drakaal3• 13 years ago

I believe Mark is in the right on this one. If I tell you I am going to sell pumpkins at the high school football game , and you decide to sell pumpkins the week before therefore reducing the market of buyers for me, you didn't hurt the "consumer" you hurt me another seller. You didn't change the price. You didn't really do "insider trading" you simply got to market faster.

hnrandom• 13 years ago

But in this case the consumers are the sellers. These are ordinary people with shares that lost value. Cuban had information that the ordinary people didn't since he was an insider, and unfairly used that information to get to market faster than everyone else. If everyone else knew that information they would have sold at the same time, causing Cuban's shares to be worth less when he tried to sell.

Also, selling pumpkins at a high school football game? Far out analogy...

drakaal3• 13 years ago

His sale didn't change the price. What it changed was how much the company could raise. Which is why it is civil not criminal. By selling he limited how much of the company was available to the public, and sold to all those who would want to buy before the company had a chance.

Limited market with a time constraint. The analogy was meant to show that the price, was the same, but with a limited number of buyers and those buyers only having limited need/desire for the offering that you could make it so their was no one to sell to in a week.

I didn't know of another way to constrain market and time on something that people would only need so much of. A hotdog they would buy next week. And it had to be a market you could saturate.

adventured• 13 years ago

Your theory rests on a faulty understanding of insider trading laws. The SEC rules simply do not work the way you think they do based on what you said.

Trading on perceived insider information is not always illegal. There are very specific situations in which it is illegal.

Cuban is going to win because he didn't agree to hold the information in confidentiality, he didn't leak the information (which could have caused all sorts of other ramifications), and he also was not a director / employee / CEO / executive etc.

The SEC needs to get him on Rule 10b5-2, and they will not be able to.

nandemo• 13 years ago

I'm not sure what's the point of that analogy since insider trading is specific to traded securities.

If the accusations are true, then he might be guilty of illegal insider trading, because he sold shares after learning of non-public information that would affect the stock price. It's not necessary to prove that the buyers suffered a loss, but it can be argued that the sale was unfair to them: they bought without knowledge that there would be a big sale soon after.

vubuntu• 13 years ago

It's absolutely insider trading, even taking your far fetched example. You just have to see it in a slightly different angle. You are talking about not hurting the 'end customer' who bought the pumpkins at the same price, just a bit earlier. But what about the loss incurred by the 'share holders' of that pumpkin merchant who now might have incurred huge losses due to lost sales because some one used 'inside' info to beat him and rip him off his sales that would have happened if someone had not used the 'inside' info and 'acted' on it.

jrs235• 13 years ago

I don't know the details of this case but what if an executive called mark up and said, hey mark were going to sell equity shares. And what if mark didn't ask for nor want to know the info? Could Execs of startups handcuff investors by volunteering this type of info to investors (and forcing it into their knowledge)?

foobarqux2• 13 years ago

In the UK yes, in the US no.

dopamean• 13 years ago

I don't think the main thing with insider trading is what you knew and when you knew it. It's what you did with the information.

Mark Cuban insider trading trial set to start

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