Did the SEC Just Get Even With Mark Cuban?

Early today, we learned that Mark Cuban was accused by the SEC of insider trading. The news raises several questions in my mind: if Cuban comes out on the wrong end of this suit, would the NBA make him sell the Mavericks? Follow-up question: with credit markets the way they are, would anyone be able to buy the Mavericks? And, finally: is this just the SEC getting even with Cubes?

Loyal readers of the “print product” will recall our November 2006 story about Sharesleuth, the journalism site launched by Cuban with this interesting business model: he acknowledged that prior to publication of negative stories about companies, he would trade their stocks. You’ll have to read our story to learn why that isn’t illegal. But as writer Gary Weiss noted:

[Sharesleuth] is not the kind of thing that gets you a nice clap on the back from the SEC, as he is exploiting a loophole in the law. Bruce Carton, a former enforcement attorney with the SEC, noted on his Securities Litigation Watch blog that Cuban had “found the previously unexploited Achilles’ heel of the insider trading laws and fired an arrow deep into it.” It’s a gap, he noted, that the SEC may decide to fill if others follow.

One more thing from that story that I find interesting. Weiss contacted R. Foster Winans, a Wall Street Journal writer who was imprisoned in the early 1980s for trading ahead of articles he wrote for the Journal. Winans had this to say about Cuban:

[I]n a world of institutional thievery, hidden fees, undisclosed conflicts of interest, ‘legal’ insider trading, engineered and misleading mutual fund returns, false and rigged analyst rankings, and all the other self-dealing behavior that is business-as-usual in the investment racket, Mark Cuban is by comparison a goddamned Mother Teresa. At least you know he’s screwing you.

Update: Cuban’s very brief, lawyer-generated response.