On August 6, 2012, the Securities and Exchange Commission obtained an emergency court order in the United States District Court for the Southern District of New York to freeze more than $6 million in assets of additional unknown traders who made approximately $2.3 million in illegal profits by trading in advance of the July 23, 2012 announcement that China-based CNOOC Ltd. had agreed to acquire Canada-based Nexen Inc. for approximately $15.1 billion.
On Friday, July 27, 2012, just days after the acquisition announcement, the SEC filed an initial complaint in federal district court in Manhattan alleging that Hong Kong-based Well Advantage Limited and other unknown traders had traded Nexen stock based on nonpublic information about CNOOC’s impending acquisition of Nexen and reaped a total of more than $13 million in illicit trading profits. That same day, the SEC obtained a court order freezing the assets of the initial defendants valued at more than $38 million.
One week later, on Friday, August 3, 2012, the SEC filed an amended complaint adding allegations that additional unknown traders in possession of material nonpublic information purchased Nexen stock in the days leading up to the public announcement of its acquisition. According to the SEC’s First Amended Complaint, the additional unknown traders opened a U.S. brokerage account through Hong Kong-based CSI Capital Management Limited only one week before the announcement and purchased 250,000 shares of Nexen stock during the following two days at a cost of approximately $4.2 million. Immediately following the announcement, the unknown traders sold these shares for nearly $6.5 million, reaping approximately $2.3 million in illegal profits. In connection with filing the First Amended Complaint, the SEC obtained another emergency court order freezing nearly $6.5 million in the assets of these additional traders, bringing the total value of assets frozen in this case to more than $44 million.
The SEC’s complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. In addition to the emergency relief, the Commission is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest and pay financial penalties, and permanently barring them from future violations.
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