The Securities and Exchange Commission has moved to freeze the assets of traders accused of illegally trading in shares in advance of the announced $15 billion acquisition of a Canadian oil producer days by the state-owned Chinese oil company, China National Offshore Oil Corporation, or Cnooc.
The action comes just days after the deal was announced, as the regulator seeks to prevent the proceeds from alleged insider trading from flowing back overseas and outside of its jurisdiction.
In a complaint filed in the Federal District Court in Manhattan on Friday, the commission said that Well Advantage, a Hong Kong-based firm, stockpiled more than 830,000 shares of the Canadian company, Nexen, in the days before its acquisition based on material, non-public information. The regulator also accused other unnamed traders of making similar purchases. As a result, when the deal was announced on Monday and the share price of Nexen rose more than 60 percent, the traders ear ned a profit of nearly $13 million, the complaint alleges.
“Well Advantage and these other traders engaged in an all-too-familiar pattern of misusing inside information to place extremely timely trades and profit handsomely from their illegal acts,†Sanjay Wadhwa, the deputy chief of the agency's market abuse unit and associate director of the New York regional office, said in a statement. “Despite the challenges of investigating misconduct in the U.S. by trading accounts located overseas, we have moved swiftly to freeze the assets of these suspicious traders and will hold them accountable for their actions.â€
The agency rushed to obtain a restraining order to freeze $38 million and presented it before a federal judge, who granted the asset freeze on Friday. The $38 million includes the overall proceeds from the trading, not just the profits.
Part of the rush is related to the difficulty that arises in retriving funds once they leave the United State s. The company accused of insider trading, Well Advantage, is controlled by a well-known Hong Kong businessman, Zhang Zhi Rong, who controls another company with a “strategic cooperation agreement†with CNOOC, the government says.
The vast majority of the trading in Nexen took place several days before the deal was announced, and occurred in accounts that had little to no history of purchasing the shares in the past, the regulator said.
