SEC Obtains Emergency Asset Freeze of Account Used in Insider Trading Ahead of Heinz Acquisition

SEC v. Certain Unknown Traders in the Securities of H.J Heinz Company (S.D.N.Y.).  On February 15, 2013, the SEC announced that it obtained an emergency court order to freeze assets in a Zurich, Switzerland-based trading account that was used to obtain more than $1.7 million from trading in advance of the February 14, 2013 public announcement about the acquisition of H.J. Heinz Company.  According to the SEC, before any public information was available that Berkshire Hathaway and 3G Capital had agreed to buy H.J. Heinz Company in a $28 billion deal, unknown traders bought call options the day before the public announcement.  After the announcement, Heinz’s stock price rose significantly.  The SEC alleges that the traders had inside information about the impending deal when they bought Heinz call options right before the announcement.  The emergency court order obtained by the SEC freezes the traders’ assets and prohibits them from destroying any evidence.  The SEC’s complaint charges the unknown traders with violating Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder.  In addition to the emergency relief, the SEC is seeking permanent injunctions, disgorgement with prejudgment interest, and civil monetary penalties.

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