SEC Freezes Assets of Insider Traders in Nexen Acquisition

Jack Humphrey, Regulatory journalist
July 30, 2012 /

A court decision has ordered to freeze the assets of traders who allegedly reaped more than $13 million illegally by trading in advance of an acquisition announcement.

The SEC, which obtained the court order, claims that Hong Kong-based firm Well Advantage Limited and other unknown traders stockpiled shares of Nexen stock based on confidential information before the announcement. Well Advantage is controlled by prominent Hong Kong businessman Zhang Zhi Rong. He also controls another company that has a “strategic cooperation agreement” with CNOOC.

The SEC obtained the court order hours after Well Advantage tried to liquidate its entire position in Nexen.

The SEC’s investigation continues. The SEC’s Market Abuse Unit led by chief Daniel M. Hawke and deputy chief Sanjay Wadhwa has conducted the investigation with the agency’s New York Regional Office.

The investigation has been conducted by the New York-based unit members Michael Holland, Simona K. Suh, Charles D. Riely, and Joseph G. Sansone along with Elzbieta Wraga in the New York Regional Office.

“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,” said Sanjay Wadhwa, Deputy Chief of the SEC Enforcement Division’s Market Abuse Unit and Associate Director of the New York Regional Office. “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.”

On July 23 CNOOC agreed to acquire Nexen for approximately $15.1 billion. Nexen’s stock subsequently rose sharply that day to close at nearly 52 percent higher than Friday’s close.

The SEC alleges that Well Advantage and certain unknown traders already acquired confidential information about the deal when they purchased Nexen’s stock before the public announcement.

Well Advantage purchased more than 830,000 shares of Nexen on July 19 and had an unrealized trading profit of more than $7 million based on Nexen’s closing price on the day of the announcement.

The other unknown traders used accounts located in Singapore to purchase more than 676,000 Nexen shares in the days prior to the announcement.

The traders immediately sold nearly all of the stock once the announcement was made, the SEC said. They profited approximately $6 million from the insider trading.

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.

 

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