SEC freezes Swiss account over Heinz mega-deal

The Security and Exchange Commission (SEC) moved Friday to freeze a Switzerland-based account that was used in a case of suspected insider trading to collect more than $1.7 million ahead of this week’s acquisition of H.J. Heinz Company.

The commission alleges that unknown traders took risky bets on Heinz’ stock just before Berkshire Hathaway and 3G Capital agreed to acquire the company in a deal valued at $28 billion.

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“Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information,” said Daniel M. Hawke, Chief of the Division of Enforcement’s Market Abuse Unit at SEC.

Upon public announcement of the acquisition, Heinz stock soared, rising 20 percent. Trading volume increased by more than 1,700 percent from the day before, the SEC noted.

SEC obtained an emergency order from Manhattan federal court to freeze assets in the Zurich-based account. The action ensures that any profits gained illegally cannot be siphoned out of the account while SEC investigates.

The commission’s complaint had information about the deal when they purchased “out-of-the-money” Heinz call options on the day before this week’s announcement. The account in question had not traded in Heinz securities in the previous six months.

General trading in Heinz options had been minimal before the deal went public, according to SEC.