OLD Media Moves

Is ShareSleuth.com insider trading?

September 27, 2007

Posted by Chris Roush

Brian Doherty of Reason magazine wonders Thursday whether the investigative business journalism web site Sharesleuth.com — which is funded by billionaire Mark Cuban — is actually insider trading.

Doherty wrote, “After all, he’s making money using knowledge he received through connections (with Carey, his employee) that the typical trader couldn’t easily know. And it’s just possible that some of Carey’s information may have come from some Samuel Waksal-like company insider, directly or indirectly, saying something to someone he isn’t legally allowed to say about his company. So I do wonder if insider-trading law mavens think a Justice Department investigation of Cuban is in order, and why or why not.”

Gary WeissForbes.com columnist Gary Weiss agrees, writing, “This is a valid concern and needs to be explored, I think. The Reason item points up, once again, why it is a bad idea for would-be publishers to trade in advance of things they publish. Sharesleuth has only gone after two public companies, and if it continues to push against the envelope I suspect that it is going to fall under regulatory scrutiny.

“One thing I find objectionable about Sharesleuth is the canard that what this outfit does in any way benefits investors. It does not. It is purely a money-making operation, and it is not clear to me if it is effective even as that.”

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