The U.S. Securities and Exchange Commission (SEC) said on Tuesday it obtained a court order last month to freeze the assets of unknown traders who posted more than $3.6 million in profits on potential illegal insider trading before Softbank announced a deal to acquire Fortress Investment.
The SEC has alleged that unknown customers of Singapore-based broker-dealer Maybank Kim Eng Securities and U.K.-based broker-dealer R.J. O'Brien Ltd. possessed material non-public information on the deal and purchased Fortress derivative securities known as contracts for difference (CFD). CFDs are prohibited in the U.S.
After the market close on February 14, Japan-listed Softbank announced plans to acquire Fortress Investment for around $3.3 billion, or $8.08 a share, a nearly 39 percent premium over Fortress' closing share price on February 13. On February 15, Fortress shares surged nearly 29 percent to close at $7.99.
The Singapore-based broker-dealers' customers purchased 950,000 Fortress common shares on February 14 before the market close and then entered orders to sell those shares the next day before markets opened for an around $1.7 million profit, the SEC statement said.
"We are currently assisting, and extending our full cooperation to the relevant authorities investigating this matter. We wish to clarify that neither Maybank Kim Eng nor any of its employees is a party to this litigation," Maybank Kim Eng said in a statement to CNBC Asia.
The U.K.-based broker-dealers' customers bought Fortress CFDs from February 10-14, representing around 1.055 million Fortress shares, then closed most of those contracts on February 15 for a profit of around $1.9 million, the SEC said.