SEC Charges Foreign Trader and Entities in Scheme Occurring Earlier This Week
Agency Obtains Court Order Freezing Several Million Dollars in Trading Accounts
FOR IMMEDIATE RELEASE
Washington, D.C., July 23, 2009 — The Securities and Exchange Commission today charged a trader located in Kuwait and three related foreign entities for engaging in an illicit scheme through which they reaped millions of dollars in profits when trading around hoax offers to acquire U.S. companies. The SEC has obtained an emergency court order to freeze more than $5 million in trading profits located in various U.S. accounts in their names.
The SEC filed its charges and obtained the asset freeze within days of the latest hoax offer. The SEC alleges that Hazem Khalid Al-Braikan and the related entities traded around false news of a purported tender offer by a Middle East investment group to acquire Harman International Industries. A phony announcement publicizing the hoax offer was faxed to media outlets on Sunday, July 19, and subsequently reported on the Internet. Harman's share price climbed more than 40 percent in pre-market trading on Monday, July 20.
The SEC further alleges that two of the entities similarly traded around a hoax tender offer in April 2009, when a Kuwaiti newspaper reported that a consortium of Middle East companies were offering to purchase Textron Inc. This offer also turned out to be false. Al-Braikan and the entities amassed positions in securities of a company shortly before a bogus offer was publicized. They then sold their securities at prices inflated by the false information to reap their illicit profits.
"This case exemplifies the SEC's swift and surgical investigative skills and our determination to follow the trail wherever it leads," said Robert Khuzami, Director of the SEC's Division of Enforcement.
The SEC's complaint, filed in the U.S. District Court for the Southern District of New York, alleges that Al-Braikan traded in an account in his own name and has been associated with each of the three entities that also traded: United Gulf Bank (B.S.C.); KIPCO Asset Management Company (KAMCO); and Al-Raya Investment Company.
Upon the SEC's request, the Honorable John G. Koeltl issued a temporary restraining order freezing the defendants' assets. The order also grants expedited discovery and an order permitting alternative means of service.
The Commission alleges in its complaint that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, antifraud provisions of the federal securities laws. The complaint seeks a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.
The Commission appreciates the assistance of New York Stock Exchange Regulation and the Options Regulatory Surveillance Authority in this matter.
The Commission's investigation is continuing.
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For more information, contact:
Antonia Chion, Associate Director
SEC Division of Enforcement
Kara Brockmeyer, Assistant Director
SEC Division of Enforcement