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Mark Cuban’s In Trouble With The SEC

Mark CubanYou’ve probably already heard the news that HDNet founder and billionaire Mark Cuban may be in serious trouble with the SEC for insider trading. Seemingly every media outlet in the country is covering this story. I even saw it on the ABC Evening News earlier tonight. What Cuban has been charged with isn’t anything MMA-related, but since Cuban is still involved in MMA, I figured I would pass the story in case you were living under a rock today.

If you’re like me, you’re probably lost by the time you get to third sentence of the hard news reports, so here’s an excerpt from Deadspin’s “Mark Cuban Scandal For Dummies” story from earlier today to explain what’s going on to those of us who don’t live on Wall Street. is some sort of lame search engine that no one has ever used ever. Way back in 2004, Cuban made a sizeable investment in the company that made him its largest shareholder. (About 600,000 shares.) Later that year, Mamma decided to raise cash using something called PIPE financing. This would essentially create more shares for the public to buy, which raises cash for the company to use, but reduces the value of all existing shares.

The company called Cuban in for a meeting and told him what they were planning. (The hope was that he would buy many of these new shares, in order to maintain his investment and interest in the company.) This is totally allowed, but only with the understanding that any information the person is given must be kept confidential and they may not act on that information until it is revealed to the general public. The CEO of Mamma and others involved in the situation say that Cuban was well aware that the information was confidential and that he would not be able to act on it. This is allegedly well-documented, too.

Cuban did not approve of the PIPE strategy and wanted out. However, once the PIPE was announced the value of his shares would have gone down no matter what, so he instructed his broker to sell all of his shares immediately, which he did. By selling the shares before the announcement was made (and before the price could drop) he saved himself about $750,000. Cuban’s reported net worth is a little over $2 billion.

At the moment, Cuban is not facing any criminal charges, so unless that changes, which their report said is unlikely, he won’t be spending any time in the slammer ala Martha Stewart. However, if he’s found guilty, he’s going to end up losing a lot more than the $750k he saved himself. How much? Don’t look at me, I don’t know. I had to read the “For Dummies” version just to figure out what was going on.

I’m not going to lie though, what he allegedly did would be awful tempting. Think about this. Say next Saturday’s winning lottery numbers magically fall into your lap today, but come with the caveat that it is illegal for you to play them. Maybe you’ll be caught, maybe you won’t. Well, that’s basically the decision Cuban had to make, just in reverse.

If he’s guilty, he obviously shouldn’t have done it, but it would damn sure be tempting, wouldn’t it? Of course, if you’re already worth $2 billion, what difference does $750,000 make?

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