On February 25, 2004, the Commission filed a civil action in the United States District Court for the Southern District of New York against Moises Saba Masri ("Saba"), a Mexican national, and Albert Sutton, a broker at Middlegate Securities in New York City, New York. The Commission's complaint alleges that on August 20, 1999, the defendants violated the anti-fraud provisions of the federal securities laws by unlawfully "marking the close" and thereby manipulating the price of T.V. Azteca American Depository Receipts ("TZA"), which are listed on the New York Stock Exchange. The complaint seeks permanent injunctions and civil penalties against both defendants, and disgorgement with pre-judgment interest from Saba.

According to the Commission's complaint, in February, March, and May 1999, Saba used the brokerage account of Tentafin Limited, an offshore corporation controlled by Saba and his family, at Middlegate to sell a large number of TZA put options having strike prices of $5 and $7.50 and an expiration date of August 20, 1999. These options, if exercised by their holders, contractually obligated Saba to buy nearly 860,000 shares of TZA at $5 per share, and nearly 500,000 shares of TZA at $7.50 per share, on the August 20, 1999 expiration date.

The Commission's complaint alleges that on August 20, 1999, the price of TZA ranged from $4.9375 to $5.1875, ultimately hovering at $5 ten minutes prior to the close of trading. According to the complaint, at that point, Saba could reasonably expect that the holders of the TZA put options with a $7.50 strike price would exercise their options, causing a $3.7 million liability in Saba's Tentafin account. If the holders of the TZA put options with a $5 strike price also exercised their options, the complaint further alleges, Saba would likely incur a further liability of $4.3 million. The complaint charges that, in order to avoid incurring this additional liability, Saba instructed Sutton, his broker at Middlegate Securities, to begin buying TZA in the open market during the last ten minutes of trading so as to cause the per share price to close above $5. According to the complaint, Sutton then executed a series of precisely timed purchases with the purpose and effect of causing TZA's per share price to close above $5, thereby enabling Saba to avoid the $4.3 million additional liability on the $5 put options. The complaint alleges that Sutton's incremental purchases of 200,000 TZA during the last ten minutes of trading on August 20, 1999 constituted approximately 94% of the buy-side activity for that security during the last hour of the trading day. The complaint further alleges that, by engaging in these manipulative trades, Saba and Sutton violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The Commission wishes to acknowledge the assistance of the Chicago Board Options Exchange in this matter.

SEC Complaint in this matter