In an emergency court order, the Securities and Exchange Commission (SEC) announced that they will be freezing all assets in relation to an alleged insider trading case. This case involved the oil-and-gas conglomerate Chevron Corporation and their intentions to acquire Anadarko Petroleum Corporation, which was reported to yield roughly $2.5 million in profits.
Chevron is a multinational energy corporation based in the United States. They announced that they intended to invest in outstanding shares of Anadarko, which is also based in the U.S. and sells petroleum. While the buying of shares warrants no action on its own, Chevron intended to acquire them for $65 per share in cash and stock. This type of investment would represent a 38 percent premium over Anadarko’s closing price pre-announcement.
The SEC complaint filed in the U.S. District Court for the Southern District of New York identified a series of transitions that could be considered suspicious. Days before the announcement, unknown traders 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. After the announcement, Anadarko shares rose in price significantly. Brokerage account customers benefited greatly by either utilizing their right to gain large positions of Anadarko stock at a discount or selling many of the option contracts for profit.