The assets of a Thailand-based trader, who made more than $3 million in profits by trading in advance of last week's announcement that Virginia-based Smithfield Foods Ltd. had agreed to a multibillion-dollar acquisition by China-based Shuanghui International Holdings Ltd., were frozen Thursday by the Securities and Exchange Commission as part of an emergency court order.
The SEC alleged that Badin Rungruangnavarat in Bangkok purchased thousands of out-of-the-money Smithfield call options and single-stock futures contracts from May 21 to 28 in an account at Interactive Brokers LLC.
According to the SEC, Mr. Rungruangnavarat allegedly made the purchases based on material, nonpublic information about the potential acquisition, and among his possible sources was a Facebook friend who is an associate director at an investment bank for a different company that was exploring an acquisition of Smithfield.
After profiting from his timely and aggressive trading, the SEC said Mr. Rungruangnavarat sought to withdraw more than $3 million from his account June 3.
"The speed in which we were able to bring this emergency action exemplifies the commitment that the SEC staff brings to bear every day to keep our markets fair and investors safe," said Andrew Ceresney, co-director of the SEC's Division of Enforcement.
According to the SEC's complaint filed under seal in U.S. District Court for the Northern District of Illinois, Smithfield publicly announced May 29 that Shuanghui agreed to acquire the company for $4.7 billion, which would represent the largest-ever acquisition of a U.S. company by a Chinese buyer. Smithfield, headquartered in Smithfield, Va., is the world's largest pork producer and processor. Following the announcement, Smithfield stock opened nearly 25 percent higher than the previous day's closing price
Hong Kong-based Shuanghui owns global businesses that include food, logistics and flavoring products and is the majority shareholder in China's largest meat processing enterprise. Smithfield brands include Armour, Farmland and its namesake.
Merri Jo Gillette, director of the SEC's Chicago Regional Office, said that as alleged in the complaint, not only did Mr. Rungruangnavarat trade out of the money Smithfield call options, "he further pumped up his profits by purchasing single-stock futures, thereby reaping a total unrealized return on his investment of 3,400 percent in the span of eight days.
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