Smithfield Investor Charged with Insider Trading10 June 2013
US - The Securities and Exchange Commission has taken out an emergency court order to freeze the assets of a trader in Bangkok, Thailand, who made more than $3 million in profits by trading in advance of last week's announcement that Smithfield Foods agreed to a multi-billion dollar acquisition by China-based Shuanghui International Holdings.
The SEC alleges that Badin Rungruangnavarat purchased thousands of out-of-the-money Smithfield call options and single-stock futures contracts from 21 May to 28 May in an account at Interactive Brokers LLC.
Rungruangnavarat allegedly made these purchases based on material, non-public information about the potential acquisition, and among his possible sources is a Facebook friend who is an associate director at an investment bank to a different company that was exploring an acquisition of Smithfield.
After profiting from his timely and aggressive trading, Rungruangnavarat sought to withdraw more than $3 million from his account on 3 June.
"The speed in which we were able to bring this emergency action exemplifies the talent, tenacity, and commitment that the SEC staff brings to bear every day to keep our markets fair and investors safe," said Andrew Ceresney, Co-Director of the SEC's Division of Enforcement.
Merri Jo Gillette, Director of the SEC's Chicago Regional Office, added: "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 unrealised return on his investment of 3,400 per cent in the span of eight days. We will act quickly and decisively to uncover and take action against insider trading no matter where the trader resides or what types of securities are used to profit from non-public information."
According to the SEC's complaint filed under seal in U.S. District Court for the Northern District of Illinois, Smithfield publicly announced on 29 May that Shuanghui agreed to acquire the company for $4.7 billion, which would represent the largest-ever acquisition of a US company by a Chinese buyer.
Following the announcement, Smithfield stock opened nearly 25 per cent higher than the previous day's closing price.
The SEC obtained the emergency court order late last week on an ex parte basis.
The order freezes the proceeds of Rungruangnavarat's securities purchases, grants expedited discovery, and prohibits Rungruangnavarat from destroying evidence.
The SEC's complaint alleges that Rungruangnavarat violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief, the SEC is seeking disgorgement of ill-gotten gains with prejudgment interest, a financial penalty, and a permanent injunction.
The SEC's expedited investigation, which is continuing, was conducted jointly by staff in the Enforcement Division's Market Abuse Unit and the Chicago Regional Office, including Kathryn A. Pyszka, Frank D. Goldman, R. Kevin Barrett, Benjamin J. Hanauer and Steven C. Seeger. The Market Abuse Unit is headed by Chief Daniel M. Hawke, and the Chicago office leadership in this matter are Regional Director Merri Jo Gillette and Associate Regional Director Timothy Warren. The SEC acknowledges the assistance of the Options Regulatory Surveillance Authority (ORSA).
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