March 31, 2007
More Allegations in TXU Insider Trading Case
On March 28, the U.S. District Court for the Northern District of Illinois in Chicago entered a Temporary Restraining Order freezing assets of Sunil and Seema Sehgal, a married couple residing in the United Kingdom. The Court issued the order following the Commission's filing of an Amended Complaint, which added the Sehgals to the insider trading case that was previously filed on March 2, 2007, against certain Unknown Purchasers of TXU call options. The Amended Complaint alleges that the Sehgal's made highly profitable and suspicious purchases of 700 call option contracts for the common stock of TXU Corp. in January and February 2007. These purchases were made in advance of a public announcement that TXU had executed a merger agreement with private equity groups headed by Kohlberg Kravis Roberts & Co., Texas Pacific Group and Goldman Sachs & Co. The complaint alleges that as a result of the increase in price of TXU stock following the Announcement, the illicit profits on the Sehgal's option contracts total approximately $270,000.
The Commission's complaint against the Unknown Purchaser alleges that between February 21 and February 23 - prior to the public disclosure of the merger agreement - the Unknown Purchasers, using overseas accounts, purchased over 8,020 call option contracts for TXU stock. The unrealized illicit profits on these option contracts total approximately $5.4 million. On March 28, 2007, the District Court also approved an extension of the asset freeze as to the Unknown Purchasers who purchased TXU securities through CreditSuisse in Zurich and Fimat Banque Frankfurt Zweigniederlassung. The Court also approved a 60-day extension of the asset freeze as to the Unknown Purchaser who traded through UBS AG London.
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