BY KATIE BRENNAN
Feb. 20, 2012
The FBI and the Securities and Exchange Commission are accusing a Zurich-based Goldman Sachs trading account of insider trading related to the $23 billion takeover of ketchup-maker Heinz. The BBC says trading anomalies ahead of the announcement triggered the investigation.
“ … unusual trading in Heinz’ share options the day before. The U.S. stock market exchange, the SEC, has also filed a lawsuit against unknown traders who used a Swiss account to carry out the transaction.”
The “highly suspicious” trades came just a day before Warren Buffett’s Berkshire Hathaway and investment firm 3G Capital bought Heinz for $23 billion.
According to Bloomberg, the SEC used an emergency court order to freeze assets in that Swiss account. The traders allegedly turned $90,000 into $1.8 million in just one day.
The SEC moved quickly to keep the assets from being removed, but CNBC’s Wall Street Blogger John Carney says the agency may be over-reaching.
He points out the SEC will have to prove an insider with knowledge of the merger tipped off a trader, and that the trader knew the insider was violating his fiduciary duty in doing so.
“There’s every indication that the SEC has no idea that it can show any of these things. It admits that it doesn’t know the identity of the trader—so it certainly doesn't know how the trader (allegedly) came to know about the pending acquisition.”
But The New York Times’ DealBook explains the trader can’t stay hidden forever.
“If the securities are frozen in a Goldman account in the United States, then anyone who wants to claim them will need to make an appearance in this country and agree to be subject to the jurisdiction of the federal court.”
And that trader would have to move pretty quickly. The options traded will expire in just four months- after which they’ll be worthless.