BECKHAM
07-06-2013, 01:11 AM
A Thailand man reaped more than $3.2 million in profit from "highly suspicious" trading in shares of Smithfield Foods before last week's announcement that the pork-processing giant would be acquired by a Chinese firm, securities regulators said Thursday.
The Securities and Exchange Commission revealed the allegation against Badin Rungruangnavarat as the agency obtained an emergency federal court order freezing his assets late Wednesday.
The 30-year-old plastics firm employee reaped a 3,400% return on investments over an eight-day span by buying thousands of Smithfield call options and single-stock futures, as well as Smithfield stock, according to a federal court complaint filed in Illinois.
Call options give the buyer the right to buy a company's stock at a certain price for a fixed period of time. They're generally bought when a trader expects the stock's price to rise.
The transactions allegedly took place in the days before the May 29 public announcement that Smithfield would be acquired by Shuanghui International Holdings in a $4.7 billion deal. Under the agreement Shuanghui agreed to pay $34 a share, a 31% premium over the previous day's $25.97 closing price for Smithfield shares.
Following the announcement, the price of Smithfield shares opened nearly 25% higher than the previous day's closing price.
According to the court complaint, Rungruangnavarat opened a trading account with Interactive Brokers on May 16 and used it solely for purchases of Smithfield calls, futures and common stock. He "essentially cornered the market in Smithfield call options and futures contracts," the complaint alleges, racking up gains of $3,247,813.
SEC investigators believe he was tipped off about the acquisition, possibly by a Facebook friend who is a former employee of the firm where Rungruangnavarat works. The friend, who was not identified by name in the court complaint, is an associate director at a Thai investment bank advising another firm that considered acquiring Smithfield.
In announcing the asset freeze, the SEC said Rungruangnavarat requested a more than $3 million withdrawal from his Interactive Brokers account on or about June 3.
"As alleged in our complaint, not only did the defendant trade out of the money Smithfield call options, he further pumped up his profits by purchasing single-stock futures, thereby reaping a total unrealized return on his investment of 3,400% in the span of eight days," said Merri Jo Gillette, director of the SEC's Chicago office, in a statement. She said the agency would "take action against insider trading no matter where the trader resides."
In a similar February case, the SEC obtained a court order freezing assets in a Switzerland-based trading account used to generate more than $1.7 million in profits before the surprise acquisition of food giant H.J. Heinz. That case is pending.
The Securities and Exchange Commission revealed the allegation against Badin Rungruangnavarat as the agency obtained an emergency federal court order freezing his assets late Wednesday.
The 30-year-old plastics firm employee reaped a 3,400% return on investments over an eight-day span by buying thousands of Smithfield call options and single-stock futures, as well as Smithfield stock, according to a federal court complaint filed in Illinois.
Call options give the buyer the right to buy a company's stock at a certain price for a fixed period of time. They're generally bought when a trader expects the stock's price to rise.
The transactions allegedly took place in the days before the May 29 public announcement that Smithfield would be acquired by Shuanghui International Holdings in a $4.7 billion deal. Under the agreement Shuanghui agreed to pay $34 a share, a 31% premium over the previous day's $25.97 closing price for Smithfield shares.
Following the announcement, the price of Smithfield shares opened nearly 25% higher than the previous day's closing price.
According to the court complaint, Rungruangnavarat opened a trading account with Interactive Brokers on May 16 and used it solely for purchases of Smithfield calls, futures and common stock. He "essentially cornered the market in Smithfield call options and futures contracts," the complaint alleges, racking up gains of $3,247,813.
SEC investigators believe he was tipped off about the acquisition, possibly by a Facebook friend who is a former employee of the firm where Rungruangnavarat works. The friend, who was not identified by name in the court complaint, is an associate director at a Thai investment bank advising another firm that considered acquiring Smithfield.
In announcing the asset freeze, the SEC said Rungruangnavarat requested a more than $3 million withdrawal from his Interactive Brokers account on or about June 3.
"As alleged in our complaint, not only did the defendant trade out of the money Smithfield call options, he further pumped up his profits by purchasing single-stock futures, thereby reaping a total unrealized return on his investment of 3,400% in the span of eight days," said Merri Jo Gillette, director of the SEC's Chicago office, in a statement. She said the agency would "take action against insider trading no matter where the trader resides."
In a similar February case, the SEC obtained a court order freezing assets in a Switzerland-based trading account used to generate more than $1.7 million in profits before the surprise acquisition of food giant H.J. Heinz. That case is pending.