Mark Cuban, the high-tech entrepreneur who owns of the Dallas Mavericks, was charged by the Securities and Exchange Commission with insider trading Monday.

The SEC filed charges against Mr. Cuban in the U.S. District Court for the Northern District of Texas in connection with his June 2004 sale of 600,000 shares of Mamma.com, a meta-search engine. At the time, the SEC charged, Mr. Cuban knew of the company’s plans to issue new stock through a PIPE (private investment in public offering). Rather than suffer dilution, Mr. Cuban sold his stock before the offering, saving $750,000, the SEC charged.

Mr. Cuban, 50, co-founder of Broadcast.com, which was sold to Yahoo for $5.9 billion in 1999, is a long-time fixture of the U.S. technology community. He also gained notoriety as a star of the reality TV shows “The Benefactor” and “Dancing With the Stars.”

On Mr. Cuban’s Blog Maverick blog, Ralph C. Ferrara, Mr. Cuban’s lawyer, said his client would contest the charges, which he described as a “gross abuse of prosecutorial discretion.”

"I am disappointed that the Commission chose to bring this case based upon its Enforcement staff's win-at-any-cost ambitions. The staff's process was result-oriented, facts be damned,” Mr. Cuban said on the blog.

After he acquired his 6.3 percent position in Mamma.com, now known as Copernic, in March 2004, Mr. Cuban wrote on his blog that “I love businesses with low overhead, that don’t kneed to be technology leaders to succeed, that generate cash that they can put in the bank.”

In 2006, Mr. Cuban, ranked as the 161st wealthiest American by Forbes magazine with an estimated net worth of $2.6 billion, financed the Sharesleuth.com web site designed to ferret out fraud in publicly traded companies. Mr. Cuban said he would trade on information uncovered by Sharesleuth before publication.

On June 28, 2004, the chief executive of Mamma.com telephoned Mr. Cuban, then the company’s largest shareholder, to tell him of the PIPE offering and invite him to participate, according to the lawsuit.

“The CEO prefaced the call by informing Cuban that he had confidential information to convey to him and Cuban agreed that he would keep whatever information the CEO intended to share with him confidential,” the lawsuit said.

From that day and the following day, Mr. Cuban sold his entire stage in Mamma.com, according to complaint. At the close of trading June 29, Mamma.com announced its plan for a PIPE offering.
 
The civil lawsuit noted that the day after the announcement, the company’s stock opened at $11.89, down 9.3 percent from the previous session.

The complaint charged that Cuban violated the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 and seeks forfeiture of his gains, including interest, and an undisclosed civil penalty.

"Insider trading cases are a high priority for the Commission. This case demonstrates yet again that the Commission will aggressively pursue illegal insider trading whenever it occurs," Linda Chatman Thomsen, director of the SEC's Division of Enforcement, said in a prepared statement.


"Insider trading cases are a high priority for the Commission. This case demonstrates yet again that the Commission will aggressively pursue illegal insider trading whenever it occurs," Linda Chatman Thomsen, director of the SEC's Division of Enforcement, said in a statement.