SEC alleges suspicious Heinz trades
Swiss account frozen based on ‘risky bets’ of acquisition
WASHINGTON – Federal regulators have alleged that a brokerage account in Switzerland was used for illegal insider trading ahead of the H.J. Heinz acquisition Thursday.
The Securities and Exchange Commission obtained a court order Friday to freeze the account and prevent the assets from being moved.
The account was used for trades placed Wednesday that netted $1.7 million after the deal was announced. The SEC says it doesn’t know the identity of the traders but said they “took risky bets” that Heinz’s stock price would increase.
On Thursday, Warren Buffett’s Berkshire Hathaway and the Brazilian firm 3G announced they agreed to buy Heinz. Heinz’s stock rose nearly 20 percent after the announcement.
The SEC is alleging that the traders must have known in advance about the pending transaction based on inside information. The traders bought call options to make a huge profit of roughly 1,700 percent after the acquisition was announced.
Call options let investors place a bet on a stock without committing to buy the shares. Investors instead have the option to buy the shares later for a set price.