The US Securities and Exchange Commission (SEC) sued unknown traders over “suspicious trading” in HJ Heinz Co just a day before Warren Buffett and 3G Capital Inc announced a US$23 billion takeover of the ketchup maker.
The commission alleged in a complaint filed on Friday in Manhattan federal court that the traders earned US$1.7 million by purchasing Heinz stock just before the announcement was made.
The trading in the deal, which Heinz and 3G said is the largest ever in the food industry, was carried out through a Zurich, Switzerland-based account and involved call-option contracts, the commission said.
Trading in the options gives the right to buy the underlying shares and profit when the stock rises.
The timing and size of the trades were deemed highly suspicious by the commission because the accounts through which the traders purchased the options had no history of trading Heinz securities in the last six months.
“Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information,” Daniel Hawke, of the commission’s enforcement division’s market-abuse unit, said in a statement.
The commission on Friday said it had obtained an emergency court order to freeze assets in the Zurich-based account. The account used by the defendants was identified in the complaint as “Switzerland GS Bank IC Buy Open List Options GS & CO c/o Zurich Office.”
Tiffany Galvin, a spokeswoman for Goldman Sachs Group Inc, said the bank is “cooperating with the SEC’s investigation.”
The order prohibits the traders from destroying any evidence and the commission seeks a final judgment ordering them to disgorge their ill-gotten gains with interest, financial penalties and a permanent ban from future violations.
“Despite the obvious logistical challenges of investigating traders involving offshore accounts, we moved swiftly to locate and freeze the assets of these suspicious traders, who now have to make an appearance in court to explain their trading if they want assets unfrozen,” said Sanjay Wadhwa, senior associate director of the commission’s New York Office.
The commission alleges the defendants invested almost US$90,000 in option positions the day before the deal was announced. As a result, their position increased to more than US$1.8 million, a rise of almost 2,000 percent in one day.
The commission said that the traders had material non-public information about the impending deal when they used an omnibus account in Zurich to buy 2,533 out-of-the-money call options, which had a strike price of US$65 on Wednesday. Shares closed that day at US$60.48.
The purchase of these so-called “June US$65 call options,” which expire on June 22, was highly unusual, the commission said. On Tuesday, only 14 were purchased, regulators said, while on Monday, no such options were bought. Since Nov. 14 last year, no more than 61 such contracts had been purchased on any other single day, the commission said.
Heinz shares jumped 20 percent to US$72.50 on Thursday following the announcement that Buffett’s Berkshire Hathaway Inc and Jorge Paulo Lemann’s 3G Capital agreed to buy the Pittsburgh-based company.
As a result of the takeover announcement, the price of the June call options jumped to a close of US$7.33 on Thursday from US0.40 the day before, an increase of more than 1,700 percent.
Trading volume skyrocketed on Thursday on news of the acquisition, the commission alleged, reaching more than 64 million shares, an increase of more than 1,700 percent.
The increase was the highest level since Jan. 31, according to data compiled by Bloomberg.
“The timing, size and profitability of the defendants’ trades, as well as the lack of prior history of significant trading in Heinz,” made the transactions “highly suspicious,” the commission said in its complaint, which accuses the unnamed defendants of violating the US’ Exchange Act.
Neither 3G nor any of its employees have been accused of wrongdoing.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day
Thousands of parents in Singapore are furious after a Cordlife Group Ltd (康盛人生集團), a major operator of cord blood banks in Asia, irreparably damaged their children’s samples through improper handling, with some now pursuing legal action. The ongoing case, one of the worst to hit the largely untested industry, has renewed concerns over companies marketing themselves to anxious parents with mostly unproven assurances. This has implications across the region, given Cordlife’s operations in Hong Kong, Macau, Indonesia, the Philippines and India. The parents paid for years to have their infants’ cord blood stored, with the understanding that the stem cells they contained