A Texas jury found Mark Cuban, the billionaire owner of the NBA's Dallas Mavericks, not guilty on Wednesday of insider trading for the sale of his stock in an Internet company in 2004.
Cuban, 55, estimated by Forbes magazine to have a net worth of $2.5 billion, was accused by the U.S. Securities and Exchange Commission of trading on non-public information when he sold his 600,000 shares in Canadian Internet search company Mamma.com - worth $7.9 million - and avoided a $750,000 loss.
The jury, in federal court in Dallas, deliberated for less than four hours before finding Cuban innocent of the charge. It found that the SEC failed to prove several key elements of its case, including that Cuban traded on non-public information.
Cuban nodded and smiled when the verdict was read. Later, outside the courthouse he blasted SEC lawyer Jan Folena, saying she had tried to bully him.
"I'm the luckiest guy in the world and I'm glad I could stand up to them," Cuban told reporters.
SEC lawyers left the court quickly after the verdict was read without making extensive remarks. An SEC spokesman later issued a statement saying regulators would not let this deter them from taking people to trial.
"We respect the jury's decision," SEC spokesman John Nester said. "While the verdict in this particular case is not the one we sought, it will not deter us from bringing and trying cases where we believe defendants have violated the federal securities laws."
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According to the SEC's case, Cuban traded shares on confidential information he received from Mamma.com CEO Guy Faure that detailed a future PIPE deal involving the company. Such PIPE transactions, which stand for "private investments in public equities," tend to hurt share prices.
Faure testified that Cuban agreed to a confidential discussion regarding the PIPE deal over a phone call just prior to Cuban selling his 6 percent stake; however, Cuban denies ever having that conversation and furthermore insisted in his testimony that he would never enter into such an agreement without written documentation.
While the SEC's case rested heavily on the exclusivity of the information concerning the company's PIPE agreement prior to June 2004, the defense argued that the pending PIPE transaction was in fact public and could in no way be considered confidential information.
To support its argument, the defense pointed to an SEC filing it says was "available to anyone in the world" and submitted by Mamma.com in March 2004, more than three months prior to the June 2004 sale in question. According to the defense, the filing discussed the possibility of the company entering into a PIPE agreement, which therefore negates the prosecution's claims the information was confidential.
Additionally, the defense argued further that the 1,932 percent trading volume spike of Mamma.com stock on June 28, 2004, suggested that word of the "public" PIPE transaction had already spread outside of the company prior to Cuban selling his shares.
Cuban had faced up to $2.5 million in fines if he had been found guilty.
In addition to his ownership of the Mavericks, Cuban is one of the stars of the popular television show "Shark Tank" which features financiers analyzing and deciding whether to invest in new products presented by entrepreneurs.
The SEC brought the civil lawsuit against Cuban in November 2008. A judge dismissed the suit in 2009 but an appeals court revived the case the following year.
(Reuters contributed to this report)
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