US securities regulators yesterday filed suit against unknown traders in the options of ketchup maker HJ Heinz, alleging they traded on inside information before the company announced a deal to be acquired for $23 billion by Warren Buffett’s Berkshire Hathaway and Brazil’s 3G Capital.
The suit, filed in federal court in Manhattan, cites “highly suspicious trading” in Heinz call options just before the Feb. 14 deal announcement. It claims the traders are either in, or trading through accounts in, Zurich, Switzerland.
On Wednesday, there was a sudden burst of bullish call options buying, expecting that Heinz shares would rally in coming months. After the deal was revealed Thursday, options market experts called Wednesday’s trading “suspicious and incredibly well-timed.”
The Securities and Exchange Commission has obtained an emergency order to freeze assets in a Swiss account linked to the trading.
“Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information,” Daniel M. Hawke, chief of the SEC’s Division of Enforcement’s Market Abuse Unit.
Reps of Heinz, Berkshire and 3G were all unavailable for comment.