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February 21, 2013 at 04:44 AM
Among recent actions taken by the SEC are the freezing of assets in a Swiss account that was used for insider trading ahead of the Heinz acquisition; charges and an asset freeze against an Illinois individual and two companies seeking to exploit an immigration program; and fraud related to “risk-free” investments in a purported clean energy company.
Swiss Account Assets Frozen on Heinz Acquisition Insider Trading Case
The SEC used an emergency court order to freeze assets in a trading account in Zurich, Switzerland, to safeguard more than $1.7 million in trading proceeds.
The money was made in advance of the public announcement that Berkshire Hathaway—the firm run by Warren Buffett—and 3G Capital had agreed to acquire H.J. Heinz Co. in a $28 billion deal. The agency’s investigation into the matter is continuing.
According to the SEC’s complaint, the day before the announcement, unknown traders bought call options, betting that Heinz’s price would rise. And it did; in the wake of the announcement, the stock gained almost 20% and trading volume soared more than 1,700% from the day before.
The SEC alleges that the unknown traders knew material nonpublic information about the upcoming acquisition when they bought out-of-the-money Heinz call options the day before the announcement. Both the timing and the size of the trades were very suspicious; the account used for trading hadn’t touched Heinz in the previous six months, and overall trading in call options for the company had been minimal for several days prior to the announcement.
In addition to freezing the account assets, the order prohibits destruction of any evidence. The unknown traders have been charged with securities violations and will have to explain their actions in court before their assets can be unfrozen. The SEC is also seeking disgorgement of ill-gotten gains with interest, imposition of financial penalties, and a permanent bar from future violations.
SEC Files Charges, Freezes Assets in Immigration Program Exploitation
The SEC announced that it has charged an individual living in Illinois, and has frozen his assets along with those of two companies in a scheme to exploit a federal visa program that seeks to provide foreign investors looking not just for profits, but also for a way to become legal residents of the U.S.
According to SEC allegations, Anshoo Sethi created A Chicago Convention Center (ACCC) and Intercontinental Regional Center Trust of Chicago (IRCTC), then raked in more than $145 million in fraudulent securities sales along with $11 million in administrative fees. The money came from more than 250 investors, primarily from China, who were told that their purchases would finance construction of the “world’s first zero carbon emission platinum LEED-certified” hotel and conference center near Chicago’s O’Hare Airport. Investors were duped into believing that their investments also boosted their prospects for U.S. citizenship through the EB-5 Immigrant Investor Pilot Program. Participants in the program can gain U.S. residency via investments in projects within the U.S. that will create or preserve a minimum number of jobs for U.S. workers.
