SEC drops insider trading allegations over Anadarko deal
US regulator had frozen assets of unknown traders who bought shares in oil group
The US Securities and Exchange Commission has quietly dismissed allegations of insider trading linked to the takeover of Anadarko Petroleum last year.
The securities regulator had obtained an asset freeze in April on $2.5m of alleged illicit profits made by unknown traders of Anadarko call options.
At the time, Anadarko was the target of a bidding war between Chevron and Occidental, which ultimately succeeded in acquiring the oil and gas exploration company.
Last month, SEC lawyers told a federal court in Manhattan the SEC was dismissing the case without prejudice, meaning it could file similar claims again in the future, according to previously unreported court records.
The dismissal came after the commission discovered the identities of “persons in the UK and Russia” who were responsible for the trades, according to a November court filing that said the SEC needed a few more weeks to decide whether to name defendants or dismiss.
“My guess is they didn’t have enough facts or evidence connecting the traders to a tip so they decided they needed to dismiss the case,” said Kyle DeYoung, a partner at Cadwalader who was previously an SEC enforcement and litigation counsel.
A SEC spokeswoman declined to comment beyond the filings.
The case came in the midst of a high-profile battle for Anadarko, with Chevron first agreeing a $50bn takeover of the company and then Occidental gatecrashing the sale with a $55bn offer.
The trades at issue involved the purchase of 1,650 out-of-the-money Anadarko call options ahead of Chevron’s April 12 announcement it had agreed to buy the company. The SEC announced the asset freeze on April 29, the day Anadarko suggested it would accept Occidental’s bid. The $2.5m targeted by the SEC was released on December 5.
SEC lawyers told the court in April that the trades were “highly suspicious” because of the “timing, size, nature, and profitability of the defendants’ trades, as well as the lack of prior history of significant Anadarko options trading in the subject accounts”.
In the following months, the SEC investigated the circumstances of the trades, repeatedly asking the court to extend the asset freeze while it conducted the probe.
Investigators obtained trading records, interviewed witnesses and received information from Chevron, Occidental and Anadarko in the course of the probe, according to the November filing.
The trades were made through UK-based accounts at Cowen, the financial services group, and a Cyprus account at Renaissance Securities (Cyprus) Limited, the SEC had announced in April.
The Cowen trades were “placed on behalf of a foreign hedge fund” that is a client of Sun Global Investments, a UK brokerage firm, while the Renaissance trades were “requested” by a Cyprus subsidiary of Russia’s Veles Capital “on behalf of a Cyprus-based client”, the November filing said, noting that both Sun Global and Veles had provided documents to the SEC.