SEC Freezes Assets Behind Alleged Insider Trading
Litigation Release No. 24035/ January 26, 2018
Securities and Exchange Commission v. One or More Unknown Traders in the Securities of Bioverativ, Inc., No. 18-cv-00701 (S.D.N.Y. filed January 26, 2018)
SEC Complaint https://www.sec.gov/litigation/complaints/2018/comp24035.pdf
The Securities and Exchange Commission today announced the entry of an emergency court order freezing assets related to alleged insider trading that yielded approximately $5 million in profits in connection with an acquisition announcement by biopharmaceutical companies Bioverativ, Inc. and Sanofi S.A.
The SEC's complaint, which was filed in U.S. District Court for the Southern District of New York, identifies a series of suspicious transactions surrounding Monday's announcement of a definitive agreement under which Sanofi will acquire all of Bioverativ's outstanding shares for $105 per share in cash, representing an equity value of approximately $11.6 billion and a 63 percent premium over Bioverativ's pre-announcement closing price. The traders, who are currently unknown, allegedly used foreign brokerage accounts in Switzerland to purchase out-of-the-money call options through a U.S.-based brokerage firm and on U.S.-based exchanges in the days leading up to the public announcement of the acquisition. The court's order freezes the proceeds related to the foreign accounts' trading.
According to the SEC's complaint, some of the options positions taken in these accounts prior to the announcement represented almost 100 percent of the market for those particular out-of-the-money options. Following the acquisition announcement, Bioverativ's shares rose significantly and the brokerage account customers allegedly profited by selling many of the option contracts at a profit.
The emergency court order obtained by the SEC requires the traders to repatriate any funds or assets located outside the U.S. that were obtained from the alleged insider trading. The traders also are prohibited from destroying any evidence. The SEC's complaint charges the unknown traders with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5 and 14e-3. The SEC is seeking a final judgment ordering the traders to disgorge their allegedly ill-gotten gains plus interest, imposing civil penalties, and permanently enjoining them from future violations.
The SEC's investigation is being conducted by Michael D. Hoke and supervised by Kurt L. Gottschall and Jason J. Burt of the Denver Regional Office. The SEC's litigation is being led by Gregory A. Kasper and Mark L. Williams. The SEC appreciates the assistance of the Financial Industry Regulatory Authority. https://www.sec.gov/litigation/litreleases/2018/lr24035.htm