Atlanta SEC office says it foiled trading scheme

Investigators at the U.S. Securities and Exchange Commission’s Atlanta office said they obtained freezes on two overseas accounts holding more than $3.6 million in alleged illegal profits from insider trading.

The money, in two accounts in London and Singapore, stem from allegedly illegal profiteering on inside information that traders got ahead of SoftBank’s deal to buy Fortress Investment Group, a New York money management firm.

Such trading on “material” information typically known only to company executives and other insiders is a violation of federal securities laws.

The SEC said account freezes will ensure that the unknown traders, believed to be overseas, can’t remove any allegedly illegal profits before the agency completes its investigation.

“The detection and prosecution of insider trading continues to be a high priority in this office,” said Walter Jospin, director of the SEC’s regional office in Atlanta, where a six-person team has been involved.

The SEC said it detected suspicious trading when SoftBank, a Tokyo telecom giant that controls Sprint Corp. in the U.S., announced its $3.6 billion deal to buy Fortress after U.S. stock markets closed on Feb. 14. In an all-cash deal, SoftBank offered $8.08 per share, a 30 percent premium over Fortress’ market value before the announcement.

But by then, according to the SEC, the traders had bought Fortress stock and securities that would net them out-sized profits on changes in Fortress’ stock price.

Working through a brokerage account in Singapore, the traders had begun buying Fortress stock the day the deal was announced, about 30 minutes after Fortress’ board of directors got an email of draft resolutions to approve the deal, according to the SEC’s complaint.

The traders sold their Fortress stock one day after the deal was announced, making a profit of nearly $1.7 million.