Litigation Release No. 22428 / July 30, 2012
SEC v. Well Advantage Limited, Certain Unknown Traders in the Securities of Nexen, Inc. in an Account of Phillip Securities PTE LTD, and Certain Unknown Traders in the Securities of Nexen, Inc. in an Account of Citibank NA A/C HK 4, Civil Action 12-CV-5786 (SDNY)(RJS)
SEC FREEZES ASSETS OF INSIDER TRADERS IN NEXEN ACQUISITION
On July 27, 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 the assets of traders using trading accounts in Hong Kong and Singapore to reap more than $13 million in illegal profits by trading in advance of this week's public announcement that China-based CNOOC Ltd. agreed to acquire Canada-based Nexen Inc.
The SEC alleges that Hong Kong-based firm Well Advantage Limited and other unknown traders stockpiled shares of Nexen stock based on confidential information about the deal in the days leading up to the announcement. Well Advantage is controlled by prominent Hong Kong businessman Zhang Zhi Rong, who also controls another company that has a "strategic cooperation agreement" with CNOOC.
The SEC took the emergency action to freeze the traders' assets within days of the public announcement of the deal and less than 24 hours after Well Advantage placed an order to liquidate its entire position in Nexen. The SEC's investigation continues.
According to the SEC's complaint, filed in federal court in Manhattan, CNOOC and Nexen announced before the markets opened on Monday, July 23 that CNOOC agreed to acquire Nexen for approximately $15.1 billion. Nexen's stock subsequently rose sharply that day to close at nearly 52 percent higher than Friday's closing price.
The SEC alleges that Well Advantage and certain unknown traders were in possession of material nonpublic information about the impending acquisition when they purchased Nexen's stock in the days leading up to the public announcement. Well Advantage purchased more than 830,000 shares of Nexen on July 19 and had an unrealized trading profit of more than $7 million based on Nexen's closing price on the day of the announcement. The other unknown traders used accounts located in Singapore to purchase more than 676,000 Nexen shares in the days preceding the announcement. They immediately sold nearly all of the stock once the announcement was made for illicit profits of approximately $6 million.
The emergency court order obtained by the SEC freezes the assets of the traders valued at more than $38 million, and prohibits the traders from destroying any evidence. The SEC's complaint charges Well Advantage and the unknown traders and 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.