Federal court grants emergency order freezing trader assets in SEC case

[JURIST] The US District Court for the Southern District of New York [official website] granted an emergency order Friday freezing the assets of traders operating in Hong Kong and Singapore. The Securities and Exchange Commission (SEC) [official website; press release] is accusing the brokers of insider trading related to the July 23 acquisition of Canadian oil firm Nexen by China-based CNOOC Limited [corporate websites]. The SEC complaint [complaint, PDF] alleges that the Hong Kong-based firm Well Advantage Limited and other unknown traders engaged in "highly suspicious and highly profitable trading" of Nexen securities based on private insider knowledge of the pending acquisition by CNOOC:

The emergency court order obtained by the SEC freezes the traders’ assets valued at more than $38 million and prohibits the traders from destroying any evidence. The SEC’s complaint charges Well Advantage and the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 [Cornell LII backgrounder] and Exchange Act Rule 10b-5. In addition to the emergency relief, the Commission is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest, pay financial penalties, and permanently bar them from future violations.
The SEC has revealed that the parties purchased a combination of over 1.5 million shares for a realized and unrealized trading profit totaling more than $13 million, based on actual shares sold and Nexen’s closing price on the day of the announcement.

The SEC has been prioritizing its recent crack down on insider trading in recent years. Last month investment research firm executive Tai Ngyuen pleaded guilty [JURIST report] to insider trading in Galleon probe associated with the conviction of hedge fund executive Raj Rajaratnam [JURIST news archive]. Also last month former Goldman Sachs [corporate website] director Rajat Gupta was convicted [JURIST report] of three counts of securities fraud and one count of conspiracy to commit securities fraud, also in connection with Rajaratnam. Several other defendants have pleaded guilty in connection with that case. Former hedge fund consultant Danielle Chiesi pleaded guilty [JURIST report] in January. Former IBM senior vice president Robert Moffat was sentenced to six months in prison in September and ordered him to pay a $50,000 fine for his role in the scheme after pleading guilty [JURIST reports] in March 2010. Former Intel Capital executive Rajiv Goel pleaded guilty [JURIST report] to insider trading charges in February 2010. Rajaratnam, Chiesi, Goel and Moffat were arrested in October 2009 and charged [complaint, PDF] along with two other individuals and two business entities with insider trading. The complaint alleged that the individuals provided Galleon Group and another hedge fund with material nonpublic information about several corporations upon which the funds traded, generating $25 million in illicit gain. Rajaratnam and Chiesi originally pleaded not guilty [JURIST report] in December 2009 after being indicted for insider trading.

 

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