The Securities and Exchange Commission (SEC) announced the entry of an emergency court order freezing assets related to alleged insider trading that yielded approximately $2.5 million in profits in connection with the April 12, 2019 announcement that oil-and-gas conglomerate Chevron Corporation intended to acquire Anadarko Petroleum Corporation.
The SEC's complaint, which was filed in U.S. District Court for the Southern District of New York, identifies a series of suspicious transactions prior to the announcement that Chevron intends to acquire all of Anadarko's outstanding shares for $65 per share in cash and stock, representing a 38 percent premium over Anadarko's pre-announcement closing price.
The traders, who are currently unknown, allegedly used foreign brokerage accounts in the United Kingdom and Cyprus to purchase out-of-the-money call options through U.S.-based brokerage firms and on U.S.-based exchanges in the days leading up to the announcement. Following the acquisition announcement, Anadarko's shares rose significantly and the brokerage account customers profited by either selling many of the option contracts at a profit or exercising the options to acquire large positions of Anadarko stock at steep discounts. The court's order freezes the proceeds related to the foreign accounts' trading.
The emergency court order freezes assets or proceeds in accounts resulting from the suspicious trading, and requires the traders to repatriate any funds or assets located outside the U.S. that were obtained from the alleged insider trading. The SEC's complaint charges the unknown traders with violating the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. The SEC is seeking a final judgment ordering the traders to disgorge their allegedly ill-gotten gains plus interest, imposing civil penalties, and permanently enjoining them from future violations.
The SEC's ongoing investigation is being conducted by Jeffrey Cohen and supervised by Scott Mascianica. The SEC's litigation is being led by Keefe Bernstein and supervised by B. David Fraser. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.
