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Accounts of Maybank KE customers frozen on suspicions of insider trading

$2.4 million profit on Fortress share trade overnight


The United States Securities and Exchange Commission (SEC) has frozen the accounts of certain unknown customers of Singapore broker-dealer Maybank Kim Eng Securities (Maybank KE) on suspicions of insider trading.

In a court order obtained on Feb 24 and seen by The Straits Times, the SEC alleged that the brokerage's customers made about US$1.7 million (S$2.4 million) in potentially illegal trading profits ahead of New York-listed Fortress Investment Group's acquisition by Japanese tech giant SoftBank Group.

The US market regulator has not yet been able to identify the traders, who bought 950,000 shares of Fortress on Feb 14.

When the US markets closed, SoftBank made its offer to buy Fortress. The Maybank KE customers entered orders to sell their shares the next morning before the markets opened, and took a profit of US$1.7 million.

"The timing, size and profitability of these trades are highly suspicious," the SEC said.

"...The consummation of the deal was in serious doubt as late as Feb 12. On Feb 14, Fortress' board of directors received an e-mail at 11.02am that included draft resolutions approving the transaction."

The mystery traders began buying Fortress stock at 11.35am.

The trades were made through omnibus accounts managed by Maybank KE and maintained at UBS, the SEC said.

"The timing, size and profitability of these trades are highly suspicious ."

US Securities and Exchange Commission (SEC)

Freezing the accounts prevents evidence from being destroyed. But exposing the individuals will be hard, as omnibus accounting can mask identities.

Mr Robson Lee, partner at law firm Gibson Dunn, said "there could be many layers of nominees above the account holder", so identifying the true beneficiaries will be difficult.

He added: "There is no present legal provision for the SEC to compel the disclosure."

A Maybank KE spokesman told The Straits Times: "We are assisting and extending our full cooperation to the authorities investigating this matter. We wish to clarify that neither Maybank KE nor any of its employees is a party to this litigation in the US District Court."

The SEC alleged that unknown customers of RJ O'Brien, a London-based derivatives clearing agent, turned an illegal profit of US$1.9 million on Feb 15 after buying Fortress derivative securities between Feb 10 and 14.

In total, the customers at Maybank KE and RJ O'Brien made profits of over US$3.6 million from trading on what could have been material, non-public information, it said.

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