Known as a savvy businessman on ABC's reality show "Shark Tank," Mark Cuban went on trial Monday in federal court in Dallas on accusations he "committed fraud by engaging in illegal insider-trading," according to court documents.
The complaint, filed by the Security and Exchange Commission, states Cuban agreed to keep non-public information privately exchanged between he and the CEO of a small Internet-search company confidential, but instead used the it to sell his 600,000 shares in the company, avoiding $750,000 in losses. The SEC wants to recoup the money, impose civil fines and enjoin Cuban from similar alleged misconduct.
All of Cuban's interactions with the company, formerly known as Mamma.com Inc., now Copernic Inc., occurred in 2004 when Cuban initially acquired a 6.3 percent stake in it, in March of that year, the documents state.
Three months later upon discovering that a private placement known as a Public Investment in Public Equity (PIPE) offering progressed towards closing, the CEO sent an email titled 'Call me pls,' in which "he asked Cuban to call him 'ASAP' to inform him of the closing." The complaint states that Cuban called the CEO and spoke to him for more than eight minutes to discuss Cuban's stake in the company.
According to the court documents, Cuban became very upset and angry during the conversation, saying he "did not like PIPEs because they dilute the existing shareholders."
"Well, now I'm screwed. I can't sell," Cuban said, according to the SEC.
During the after-hours trading on June 28, 2004 Cuban sold 10,000 of his 600,000 Mamma.com shares. The following morning, he sold his remaining 590,000 shares during regular trading hours.
The documents allege that Mamma.com's executive chairman sent an additional email to the board members the same morning of June 29, 2004 indicating Cuban had acknowledged "he would not invest, does not want the company to make acquisitions and that he will sell his shares which he cannot do until after we announce."
That evening, after the markets had closed, Mamma.com publicly announced the PIPE offering, after Cuban had already sold his shares, the SEC said in the complaint.
Cuban, who is expected to testify, said publically via his attorney on his blog that there was no agreement to keep information confidential.
"The SEC knows their case centers on one telephone conversation between two individuals-four years ago," one of Cuban's attorneys Stephen A. Best said in the statement. "The SEC claims there was an agreement between these parties to the conversation to keep certain information confidential. We interviewed Guy Faure, the former CEO of Mamma.com Inc., with whom the SEC claims Mr. Cuban made an agreement. We had a court reporter transcribe the interview. There was no agreement to keep information confidential."
Cuban's attorneys in Dallas, said they have no further comment on the case, which began jury selection today. The SEC provided the court documents to ABCNews.com but had no further comment on the case as well.
The lawsuit was originally dismissed by U.S. District Judge Sidney Fitzwater who agreed that insider-trading laws did not prohibit Cuban from selling his shares, but the ruling was overturned by an appeals court, which sent the case back to Fitzwater for trial.
Cuban, 55, resides in Dallas and is the owner of the Dallas Mavericks, HDNet, a national high-definition television network, as well as Landmark Theaters.
In March 2013, Sports Illustrated listed Cuban among the 50 most powerful people in sports. His net worth is estimated at $2.5 billion by Forbes.Also Read