SEC Freezes $3M in Assets of Thailand-Based Trader for Insider Trading Ahead of Smithfield Foods Acquisition Announcement

By on June 10, 2013

The Securities and Exchange Commission (SEC) froze the assets of Badin Rungruangnavarat, a trader in Bangkok, Thailand, who allegedly made more than $3 million in profits by trading on inside information in connection with the acquisition of Smithfield Foods by Shuanghui International Holdings. 

According to the SEC’s complaint, Smithfield publicly announced on May 29 that Shuanghui agreed to acquire the company for $4.7 billion, which would represent the largest-ever acquisition of a U.S. company by a Chinese buyer.   Smithfield, which is headquartered in Smithfield, Va., is the world’s largest pork producer and processor. Following the announcement, Smithfield stock opened nearly 25 percent higher than the previous day’s closing price. 

The SEC accused Rungruangnavarat of purchasing thousands of out-of-the-money Smithfield call options and single-stock futures contracts from May 21 to May 28 in an account at Interactive Brokers LLC.  Rungruangnavarat allegedly executed these purchases based on material, nonpublic information about the potential acquisition of Smithfield and that he may have received from a Facebook friend who is an associate director at an investment bank to a different company that was exploring an acquisition of Smithfield.  After profiting from his timely and aggressive trading, Rungruangnavarat sought to withdraw more than $3 million from his account on June 3. 

The SEC’s complaint alleges that Rungruangnavarat violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.  In addition to the emergency relief, the SEC is seeking disgorgement of ill-gotten gains with prejudgment interest, a financial penalty, and a permanent injunction.   

“The speed in which we were able to bring this emergency action exemplifies the talent, tenacity, and commitment that the SEC staff brings to bear every day to keep our markets fair and investors safe,” said Andrew Ceresney, Co-Director of the SEC’s Division of Enforcement. 

Merri Jo Gillette, Director of the SEC’s Chicago Regional Office, added, “As alleged in our complaint, not only did the defendant trade out of the money Smithfield call options, he further pumped up his profits by purchasing single-stock futures, thereby reaping a total unrealized return on his investment of 3,400 percent in the span of eight days.  We will act quickly and decisively to uncover and take action against insider trading no matter where the trader resides or what types of securities are used to profit from nonpublic information.” 

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