Some traders made a bundle over the big HJ Heinz acquisition yesterday, and federal regulars suspect insider trading. The SEC obtained a court order today to freeze a brokerage account in Switzerland and prevent the assets from being moved. The account was used for trades placed Wednesday that netted $1.7 million after the deal was announced. The SEC says it doesn't know the identity of the traders but said they "took risky bets" that Heinz's stock price would increase. Yesterday, Warren Buffett's Berkshire Hathaway and the Brazilian firm 3G announced they agreed to buy Heinz, and the company's stock rose nearly 20% after the announcement.
The SEC is alleging that the traders must have known in advance about the pending transaction based on inside information. The SEC's complaint does not allege any wrongdoing by Heinz or the company's new owners. "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 an SEC official.