U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23591 / July 5, 2016
United States v. Luis Martin-Caro Sanchez, No. 16-cr-426 (N.D. Ill. filed June. 30, 2016)
Securities and Exchange Commission v. Luis Martin-Caro Sanchez, Civil Action No. 1:10-cv-5268 (N.D. Ill.)
Spanish Investor Indicted for Impeding SEC Investigation and Litigation Regarding $4.6 Million Insider Trading Scheme
A federal grand jury in Chicago has indicted the subject of an insider trading case for allegedly covering up a scheme that netted more than $4.6 million. The indictment announced June 30 has charged Luis Martin-Caro Sanchez with two counts of perjury and one count of obstruction of justice related to the SEC's prior investigation and litigation against him. Federal authorities will seek to extradite Martin-Caro Sanchez to the United States. An arraignment date in federal court in Chicago has not yet been scheduled.
According to the charges, Australian mining company BHP Billiton decided in August 2010 to make a tender offer for all of Potash's common stock. BHP dealt with several foreign investment banks to secure confidential financing commitments in an effort to underwrite the offer. During a meeting in Chicago on August 12, 2010, BHP's chief executive officer conveyed a $38.6 billion buyout offer to Potash's chief executive. Potash rejected the offer, but it did not publicly announce the matter until August 17, 2010, according to the indictment.
During those interim five days, Martin-Caro Sanchez communicated extensively with his banking and investor friends, the indictment states. On August 12 and 13, 2010, Martin-Caro Sanchez purchased approximately 331 out-of-the-money call option contracts for Potash stock via an account at Interactive Brokers LLC, according to the indictment. Martin-Caro Sanchez's contracts were set to expire within weeks of the purchase date, the indictment states. The indictment also states that Martin-Caro Sanchez netted approximately $496,953 - a return of approximately 1,046% on his investment.
In a telephonic deposition taken as part of the SEC's civil action against Martin-Caro Sanchez on July 1, 2011, Martin-Caro Sanchez allegedly lied under oath when he denied knowing other people who purchased Potash securities in advance of Potash's announcement of the buyout offer. He also allegedly lied when he denied knowing the telephone numbers of two individuals connected to those trades. Telephone records indicate that Martin-Caro Sanchez had called each of them numerous times in the days between the private offer and Potash's public announcement of it, the indictment states. In late 2010 a friend who profited approximately $540,493 from Potash options sales sent 100,000 euros to Martin-Caro Sanchez's bank account in Zurich, Switzerland, the indictment states. Sanchez withheld information about his Swiss account from the SEC during its investigation, according to the indictment.
On December 28, 2011, the Court hearing the SEC's civil action granted Martin-Caro Sanchez's motion for summary judgment and ruled that the staff's evidence was not sufficient to prove that Martin-Caro Sanchez had access to material, non-public information about the acquisition attempt. The SEC discovered the Zurich account and the friend's payment in January 2014 - more than two years after the SEC's lawsuit against Martin-Caro Sanchez had ended, the indictment states.
The SEC thanks the U.S. Attorney's Office for the Northern District of Illinois for its efforts in bringing this criminal action.