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U.S. Securities and Exchange Commission


Litigation Release No. 23760 / February 28, 2017

Securities and Exchange Commission v. One or More Unknown Traders in the Securities of Fortress Investment Group, LLC, Civil Action No. 2:17-CV-01287 (D.N.J.)

SEC Freezes Assets of Unknown Traders in Supsected Insider Trading Ahead of Fortress Acquisition

The Securities and Exchange Commission obtained an emergency court order on February 24, 2017, to freeze the assets of certain unknown traders using brokerage accounts in London and Singapore to reap more than $3.6 million in potentially illegal trading profits in advance of the announcement after the market close on February 14, 2017 that Japan-based Softbank Group Corp. agreed to acquire Fortress Investment Group, LLC.

The SEC's emergency action to freeze the proceeds of the traders' highly suspicious transactions within days of the public announcement ensures that the profits cannot be removed from the accounts while the agency's investigation of the trading continues.

According to the SEC's complaint filed in federal court in New Jersey, Softbank announced that it had agreed to acquire Fortress for approximately $3.3 billion in cash. Under the terms of the agreement, Softbank would pay $8.08 per share, a premium of 38.6% over Fortress's closing price on February 13, 2017. Fortress, whose shares closed at $6.21 on February 14, 2017, closed at $7.99 on February 15, 2017.

The SEC alleges that certain unknown customers of a Singapore-based broker-dealer and a U.K.-based broker-dealer were in possession of material nonpublic information about the impending acquisition when they purchased Fortress derivative securities known as contracts for difference in the days leading up to the public announcement. The customers of the Singapore-based broker-dealer purchased 950,000 shares of Fortress common stock on February 14, 2017 before the market close and entered orders to sell those shares the next morning before markets opened for a profit of approximately $1.7 million. The customers of the U.K.-based broker-dealer purchased Fortress contracts for difference between February 10 and February 14, 2017, representing 1,055,500 shares of Fortress. The vast majority of those contracts were closed on February 15, 2017 for a realized profit of approximately $1.9 million.

The emergency court order obtained by the SEC freezes the unknown traders' assets and prohibits the traders from destroying any evidence. The SEC's complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. In addition to the emergency relief, the Commission is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest, pay financial penalties, and permanently enjoin them from future violations.

The expedited investigation is being conducted by Thomas Bosch and William Dixon of the SEC's Atlanta Regional Office, under the supervision of Natalie Brunson, Aaron Lipson, and Walter Jospin. The SEC's litigation is being handled by W. Shawn Murnahan. The SEC thanks the Financial Industry Regulatory Authority (FINRA) for its significant assistance in this matter.

SEC Complaint



Modified: 03/01/2017