TORONTO/WASHINGTON (Reuters) - Two Spaniards were charged with insider trading in Potash Corp before BHP Billiton announced its $38.6 billion hostile bid for the Canadian fertilizer company, the U.S. Securities and Exchange Commission said on Tuesday.
The SEC alleged that the two, who reside in Madrid, Spain, used material nonpublic information to illegally trade Potash Corp securities before the BHP announcement.
The SEC said the duo made nearly $1.1 million in illegal profits. The regulator has obtained an emergency court order to freeze the traders’ assets.
The SEC alleges that Juan Garcia and Luis Sanchez purchased hundreds of “out-of-the-money” call option contracts for stock in Potash Corp in the days leading up to the public announcement of BHP’s bid.
Garcia is the head of equity derivatives research at Banco Santander -- a Spanish banking group that advised BHP on its bid.
According to the SEC’s complaint, filed in the U.S. District Court for the Northern District of Illinois, Garcia and Sanchez jointly spent a little more than $61,000 to purchase the contracts in U.S. brokerage accounts.
The two immediately sold all of their options after BHP’s offer was announced publicly on August 17.
Both Garcia and Sanchez purchased the contracts through accounts with Interactive Brokers LLC. Neither individual had previously traded this year in Potash Corp securities through their respective accounts.
The SEC said the court order it has obtained also prohibits Garcia and Sanchez from destroying evidence.
Reporting by Rachelle Younglai; Editing by Steve Orlofsky and Richard Chang