SEC Loses Mark Cuban Suit

Years ago, in what we viewed as a far too convenient allegation, the SEC accused billionaire Mark Cuban of insider-trading. The allegations were odd - the SEC alleged that the CEO in question told Mr. Cuban, that he had confidential information to provide to him, and that Mr. Cuban agreed to keep it confidential. That allegation raises the question, can the CEO of a public company voluntarily provide material, non-public information to someone, and prevent that someone from trading? Is so, it is a great way to keep your largest shareholder from selling his stock - call him up and give him some inside information.

I have a number of blog posts on the case. All are collected in Mark Cuban SEC. All predicted a loss for the SEC, given the sheer lack of legal weight to the claims.

But that is not often enough. It is an unfortunate part of our society that the government often wins cases simply because the target of its ire does not have the ability to fight back. There are countless examples of small brokerge firms, investors and individual brokers who settle SEC, or FINRA cases simply because they cannot afford to fight, even though they are right.

I had the pleasure to represent a broker who did not back down from a fight with FINRA, who  refused to settle with them when he was right and FINRA was wrong. It was a time consuming and expensive fight, but we won, and FINRA lost.

It was therefore a pleasure to watch Mark Cuban fight back. He certainly has the financial ability, but he also had the nerve to do so. And, after only a few hours of deliberation, much of which was probably discussing football, so as to not embarass the SEC, the jury in federal district court in Dallas said that the Securities and Exchange Commission failed to prove the key elements of its case, including the claim that Cuban agreed to keep certain information confidential and not trade on it.

During an impromptu news conference outside the courthouse, Mark Cuban angrily denounced the SEC and its lead trial attorney, Jan Folena, saying that they lied about the evidence and targeted him because of his fame.

Mr, Cuban acknowledged that  defendants of lesser wealth could have been bullied.

''Hopefully people will start paying attention to how the SEC does business,'' Cuban said. ''I'm the luckiest guy in the world. I'm glad this happened to me. I'm glad I'm able to be the person who can afford to stand up to them.''

For more information - Jury says Cuban did not commit insider trading 

Appellate Court Reinstates SEC vs. Cuban

The Fifth Circuit Court of Appeals reversed the District Court ruling which dismissed the SEC's complaint against Mark Cuban. We previously addressed the merits, or rather the apparent lack of merit, to the SEC's claims here.

However, the appellate court found that there were facts that were in dispute, an that the case should not have been dismissed. The case will proceed back in the District Court. More>>>

SEC Continues Mark Cuban Fight

The SEC is in trouble. We all know that, and they need to show that they are active, aggressive and enforcing the securities laws. So, we get surprise examinations, a flurry of press releases and other assorted activity. Good for them, they need to regroup and recover from their recent failures.

But do you gain respect and reputation by pursuing bad cases? Of course not,and someone needs to tell the decision makers at the Commission. In August the SEC announced that it would not refile a complaint against Cuban, and yesterday the SEC annouced that it will appeal the court decision which tossed out their complaint against Mark Cuban.

The decision was not much of a surprise. The Commission was on thin ice, and stretching the law in the Cuban case, which is why the Court dismissed the complaint. Our analysis is here, and all of our posts related to Mark Cuban are here. The WSJ story on the appeal, with background information is here.