There is a tinge of irony in the SEC’s allegations of insider trading against Mark Cuban: He has been investigating cases of misinformation in other companies for years through Sharesleuth.com.
The site launched by Cuban and Chris Carey, a former business reporter for the St. Louis Post-Dispatch, in July 2006 with the intent of “exposing securities fraud and corporate chicanery,” but it has also been under fire for being funded not through advertising but by short-selling the stocks that are under investigation.
“I think that Sharesleuth itself was kind of an insider trading vehicle,” said Gary Weiss, author of the book Wall Street Versus America and contributing editor for Portfolio.
But there is nothing inherently wrong with what Cuban has been doing with Sharesleuth, says Bill Leone, partner with Faegre & Benson and a securities attorney and former United States Attorney for Colorado.
“Insider trading is kind of a hard thing to recognize,” he said. “There’s nothing illegal about people investigating companies and learning info through legitimate means that causes them to go out and buy or sell stock.”
The difference between Sharesleuth.com and the charges involving
Mamma.com is that while the law does not restrict anyone from doing research it also does not allow someone with a certain duty of confidentiality to divulge information to manipulate share prices. With
Sharesleuth, Cuban had no apparent relationship with the companies they covered; the facts related to the SEC charges are yet to be stipulated or litigated.
“What’s important about that case is that they’ve basically alleged that he obtained that information and used it improperly,” said Leone,
“because it was given to him under a condition of confidentiality to gauge his interest as an investor.”
Sharesleuth.com editor Chris Carey declined to comment.
Photo: Flickr/mil8
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