The Securities and Exchange Commission obtained an emergency court order on Feb. 24 to freeze the assets of certain unknown traders using brokerage accounts in London and Singapore to reap more than $3.6 million in potentially illegal trading profits in advance of the announcement after the market close on Feb. 14 that Japan-based Softbank Group agreed to acquire Fortress Investment Group.
The SEC's emergency action to freeze the proceeds of the traders' highly suspicious transactions within days of the public announcement ensures that the profits cannot be removed from the accounts while the agency's investigation of the trading continues.
According to the SEC's complaint filed in federal court in New Jersey, Softbank announced that it had agreed to acquire Fortress for approximately $3.3 billion in cash. Under the terms of the agreement, Softbank would pay $8.08 per share, a premium of 38.6% over Fortress' closing price on Feb. 13. Fortress, whose shares closed at $6.21 on Feb. 14, closed at $7.99 on Feb. 15.
The SEC alleges that certain unknown customers of a Singapore-based broker-dealer and a U.K.-based broker-dealer were in possession of material nonpublic information about the impending acquisition when they purchased Fortress derivative securities known as contracts for difference in the days leading up to the public announcement.
The customers of the Singapore-based BD purchased 950,000 shares of Fortress common stock on Feb. 14 before the market close and entered orders to sell those shares the next morning before markets opened for a profit of approximately $1.7 million.
The customers of the U.K.-based BD purchased Fortress contracts for difference between Feb. 10 and Feb. 14, representing 1.055 million shares of Fortress. The vast majority of those contracts were closed on Feb. 15 for a realized profit of approximately $1.9 million.
The emergency court order obtained by the SEC freezes the unknown traders' assets and prohibits the traders from destroying any evidence. In addition to the emergency relief, the SEC is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest and pay financial penalties, along with a permanent injunction from future violations.
Court Fines Promoter, Recipients of Illicit Proceeds From Pyramid Scheme Targeting Latinos
The SEC announced that on Feb. 24 the federal court in Boston entered final judgments against defendant Andrew Arrambide of Sandy, Utah, and relief defendants Uninvest Financial Services Corp. ("Uninvest"), RST5 Investments LLC ("RST5″), Parkway Real Estate LLC ("Parkway") of Florida, and Paulo Hideki Koga of Brazil, in a previously filed enforcement action.
In February 2015, the SEC charged two Portuguese companies operating under the name Wings Network, plus three company officers and 12 promoters, including Arrambide, with perpetrating an international pyramid scheme targeting Latino communities in the U.S.
The judgment ordered Arrambide to pay more than $106,000 in disgorgement of ill-gotten gains, prejudgment interest and a civil penalty, and the judgements against the relief defendants ordered Uninvest to pay a total of $4.8 million, RST5 to pay $2 million, Parkway to pay a $312,000, and Koga to pay $528,000 in disgorgement plus prejudgment interest. The court's entry of the final judgments concludes the SEC's litigation of this matter.
SEC Obtains Favorable Jury Verdict Against Racetrack Exec
