US agency freezes assets of Maybank KE Singapore customers on suspicions of insider trading

The United States Securities and Exchange Commission has frozen the assets of certain unknown customers of Singapore broker-dealer Maybank Kim Eng Securities on suspicions of insider trading.
The United States Securities and Exchange Commission has frozen the assets of certain unknown customers of Singapore broker-dealer Maybank Kim Eng Securities on suspicions of insider trading.PHOTO: ST FILE

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

In a court order obtained on Feb 24 and seen by The Straits Times, the SEC alleged that the Maybank KE customers made about US$1.7 million (S$2.4 million) in potentially illegal trading profits ahead of the announcement on Feb 14 that Japanese tech giant Softbank Group had agreed to acquire New York-listed Fortress Investment Group.

The Maybank KE customers, whom the US market regulator has not yet been able to identify, bought 950,000 shares of Fortress at prices ranging from US$5.92 to US$6.35 per share on Feb 14, before Softbank announced the acquisition after US markets closed.

According to the announcement, Fortress shareholders would receive US$8.08 per share, a premium of 30 per cent over Fortress's closing price that day of US$6.21.

The Maybank KE customers entered orders to sell their shares the very 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.

"Based on information received from Fortress, the consummation of the deal was in serious doubt as late as Feb 12. Then... on Feb 14, Fortress's board of directors received an email at 11:02 am that included draft resolutions approving the transaction." The Maybank KE customers began buying Fortress stock at 11:35 a.m, said SEC.

Maybank maintains a prime brokerage relationship with UBS in London, which allows it to trade on the US markets through accounts at UBS.

Maybank's only other trading in the UBS omnibus account in Fortress stock over the past 14 months consisted of a purchase of 10,000 shares in February 2016 and the sale of those shares in April 2016, the SEC said.

A Maybank Kim Eng spokesperson told The Straits Times: "We are currently assisting and extending our full cooperation to the relevant authorities investigating this matter. We wish to clarify that neither Maybank Kim Eng nor any of its employees is a party to this litigation in the United States District Court involving the securities of Fortress Investment Group."

In its court complaint, the SEC also named certain unknown customers of RJ O'Brien Ltd, a London-based derivatives clearing agent, who between Feb 10 and Feb 14 purchased Fortress derivative securities and turned a profit of about US$1.9 million on Feb 15.

In total, the customers at Maybank KE and RJ O'Brien made profits of over US$3.6 million from trading on material, nonpublic information, the SEC said.

The SEC's emergency court order freezes these unknown traders' assets and prohibits them from destroying any evidence.

The SEC is also "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", it said.