U.S. Securities and Exchange Commission

Litigation Release No. 21631 / August 25, 2010

SEC v. Juan Jose Fernandez Garcia and Luis Martin Caro Sanchez, Case No. 10 C 5268 (N.D. Ill., August 20, 2010)

SEC Freezes Assets of Two Madrid, Spain-Based Traders for Insider Trading Around the Public Announcement of BHP’s Tender Offer for Potash Corp.

On August 20, 2010, the Honorable Matthew F. Kennelly of the United States District Court for the Northern District of Illinois issued under seal a temporary restraining order and asset freeze against Juan Jose Fernandez Garcia (Garcia) and Luis Martin Caro Sanchez (Sanchez), both residents of Madrid, Spain. The emergency court order obtained late Friday by the SEC and unsealed by the Court today freezes approximately $1.1 million in assets and, among other things, grants expedited discovery and prohibits Garcia and Sanchez from destroying evidence. 

The Commission’s complaint alleges that Garcia and Sanchez engaged in insider trading in call options contracts of Potash Corp. of Saskatchewan, Inc. (Potash) just prior to an August 17, 2010 public announcement by Potash that it had received and rejected an unsolicited proposal from BHP Billiton Plc (BHP) to acquire Potash’s stock for $130 per share. In the complaint, the Commission alleges that on Tuesday, August 17, it was publicly announced that BHP had made an unsolicited $38.6 billion offer to purchase all of the stock of Potash for $130 per share in cash. The acquisition share price represented a 16% premium above Potash’s closing price of $112.15 on Monday, August 16. The complaint alleges that Garcia, the Head of European Equity Derivatives Research at Banco Santander, S.A., a Spanish banking group advising BHP on its bid, was in possession of material, nonpublic information regarding BHP’s offer to acquire Potash while he purchased, from August 12 to 16, 2010, approximately 282 call option contracts for Potash stock, the majority of which were scheduled to expire on August 21, 2010. The complaint further alleges that all but 6 of the call option contracts purchased by Garcia were out-of-the-money.

The complaint also alleges that on August 12 and 13, 2010, Sanchez, while in possession of material, nonpublic information regarding BHP’s offer to acquire Potash, purchased approximately 331 out-of-the-money call option contracts for Potash stock in an account at Interactive Brokers, LLC, the same U.S. brokerage firm through which Garcia traded his Potash call option contracts. The complaint further alleges that Sanchez’s contracts were set to expire within weeks of the purchase date. The Commission alleges that neither individual had previously traded this year in Potash securities through his account at Interactive Brokers.

The complaint charges each of the defendants with violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. In addition to the emergency relief already obtained, the Commission is seeking preliminary and permanent injunctions against future violations of the above provisions of the federal securities laws, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties. 

See Also: SEC Complaint


Last modified: 8/25/2010