SEC alleges insider trading ahead of CNOOC-Nexen deal

Sat Jul 28, 2012 5:57am EDT
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WASHINGTON (Reuters) - The U.S. securities regulator filed a complaint in court on Friday against a firm controlled by a Chinese billionaire and other traders, accusing them of making over $13 million from insider trading ahead of a bid by China's CNOOC for Canadian oil company Nexen Inc.

The Securities and Exchange Commission said the federal court in Manhattan had frozen assets worth over $38 million belonging to Hong Kong-based Well Advantage, controlled by businessman Zhang Zhirong, and other unnamed traders who used accounts in Hong Kong and Singapore to trade in Nexen stock.

They made trading profits of $7 million and $6 million respectively by using inside knowledge of the merger to buy Nexen shares before the announcement, the SEC says.

The trading was suspicious, the SEC claims in its complaint, because the accounts used to buy the shares had 'either no history or extremely limited history" of buying Nexen shares before July 2012.

CNOOC said on July 23 it had agreed to acquire Nexen for $15.1 billion, China's biggest foreign takeover bid. Shares of Nexen jumped almost 52 percent that day.

The unnamed Singapore traders used accounts in the names of Phillip Securities and Citibank, while Well Advantage made its trades through accounts held at UBS Securities and Citigroup Global Markets. Neither of the Well Advantage accounts had traded Nexen shares since January 2012, and the Citigroup account had been completely dormant for over six months.

Zhang Zhirong also controls China Rongsheng Heavy Industries Group Holdings, which according to a company filing in October 2010, entered a strategic cooperation agreement with CNOOC.

A spokeswoman for CNOOC declined to comment. Calls to Well Advantage's office in Hong Kong were not answered on Saturday.

Hong Kong's Securities and Futures Commission also declined comment while officials at the Monetary Authority of Singapore were not immediately available.   Continued...

The man stands at the front desk of the headquarters of China National Offshore Oil Corp (CNOOC) in Beijing July 25, 2012. REUTERS/Jason Lee