Saturday, August 4, 2007

SEC Identifies English Trader in Petco Insider Trading

The SEC filed an amended complaint (here) identifying a heretofore unknown purchaser of out-of-the-money call options in Petco in July 2006 before the company announced it was being taken private.  The SEC identified suspicious overseas trading in the weeks before the announcement, and filed an "unknown purchasers" complaint three days after the deal became public in order to freeze the proceeds from the transactions before they could leave the United States.  According to the Litigation Release (here):

The amended complaint alleges that Suterwalla entered into the transactions while aware of material nonpublic information regarding the pending acquisition of Petco, and that he took highly leveraged and speculative positions in the price of Petco's securities, which exposed him to the potential for millions of dollars in losses if Petco's price declined. The amended complaint further alleges that Suterwalla made all of his purchases within 17 days of Petco's acquisition announcement, that he made a number of his purchases the day before the announcement, and that his illicit profit from these transactions was more than $3 million.

No word yet on whether the newly identified defendant will show up to defend the SEC complaint and seek to regain his profits -- but I rather doubt it because there may well be a sealed indictment with his name floating around. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2007/08/sec-identifies-.html

Civil Enforcement, Insider Trading, Securities | Permalink

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