US securities regulator yesterday obtained an emergency court order to freeze a Goldman Sachs Swiss trading account and filed a suit against unknown traders over insider trading charges in the proposed $23-billion acquisition of H J Heinz by Warren Buffett and 3G Capital (See: Warren Buffett, 3G Capital to buy HJ Heinz Co for $23 bn).
The suit, filed in the federal court in Manhattan, by the US Securities and Exchange Commission (SEC), says that there were "highly suspicious trading" in Heinz call options on the day prior to the announcement of the deal.
The SEC alleges that prior to any public awareness that Warren Buffett's investment arm, Berkshire Hathaway, and 3G Capital had agreed to acquire Heinz, unknown traders took risky bets that Heinz's stock price would increase. The traders purchased call options the day before the public announcement.
After the announcement, Heinz's stock rose nearly 20 per cent and trading volume increased more than 1,700 per cent from the prior day, enabling these traders to book susbrtantial profits.
According to the SEC, the unknown traders were in possession of material non-public information about the impending acquisition when they purchased out-of-the-money Heinz call options the day before the announcement.
It said that the timing and size of the trades were highly suspicious because the account through which the traders purchased the options had no history of trading Heinz securities in the last six months.