Mark Cuban, the owner of the NBA's Dallas Mavericks and an Internet entrepreneur, was charged with insider trading on Monday.
According to a complaint filed by the Securities and Exchange Commission, Cuban dodged more than $750,000 in losses by selling off 600,000 shares of Mamma.com, a publicly traded online search engine firm based in Montreal, ahead of an undisclosed discount stock offering in June 2004.
Last year, Mamma.com changed its name to Copernic Inc., and is currently traded on the NASDAQ under the ticker symbol CNIC.
The complaint, filed in a Texas district court Monday morning, describes a June 2004 phone conversation in which the company's CEO informs Cuban of confidential plans to raise capital through a private investment in public equity offering, or PIPE.
"Cuban became very upset and angry during the conversation, and said, among things, that he did not like PIPEs because they dilute the existing shareholders," the complaint says. At the end of the call, Cuban allegedly tells the CEO, "Well, now I'm screwed. I can’t sell."
According to the SEC, Cuban learned that the PIPE was being sold at a discount during a second call to a sales representative at the investment bank overseeing the sale. A minute later, Cuban called his broker and sold his entire stake in the company, the SEC says.
The commission is charging Cuban with violating antifraud provisions of both the Securities Act of 1933 and the Securities Exchange Act of 1934. If found guilty, Cuban could be ordered to repay the losses he avoided from the sale, along with a fine.