WASHINGTON (AP) - A brokerage account held at a subsidiary of Goldman Sachs in Switzerland was used for insider trading ahead of the H.J. Heinz acquisition, US federal regulators have alleged.
The Securities and Exchange Commission (SEC) obtained a court order on Friday to freeze the account and prevent the assets from being moved.
The account was used for trades placed on Wednesday that netted US$1.7 million (S$2.1 million) after the deal was announced. The SEC said it does not know the identity of the traders, but that they "took risky bets" that Heinz's stock price would increase.
On Thursday, Mr Warren Buffett's Berkshire Hathaway and the Brazilian firm 3G announced they agreed to buy Heinz. Heinz's stock rose nearly 20 per cent after the announcement.
The SEC is alleging that the traders must have known in advance about the pending transaction based on inside information. The traders bought call options to make a huge profit of roughly 1,700 per cent after the acquisition was announced.
Call options let investors place a bet on a stock without committing to buy the shares. Investors instead have the option to buy the shares later for a set price.
The Swiss account had not traded securities related to Heinz for nearly six months before purchasing the options, the SEC said in a complaint filed in federal court in New York.
"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 non-public information," Mr Daniel Hawke, an SEC official, said in a statement.
Representatives for Berkshire Hathaway and the public relations agency representing 3G and Berkshire in the deal did not immediately return messages for comment. A spokesman for Heinz said the company had not been contacted by the SEC and therefore did not have any comment.
The SEC's complaint does not allege any wrongdoing by Heinz or the company's new owners.
The account was held at a subsidiary of Goldman Sachs in Zurich. Ms Tiffany Galvin, a spokeswoman at Goldman, said the company is "cooperating with the SEC's investigation".