The regulator says Hong Kong-based Well Advantage Ltd. and other unnamed trading firms were stockpiling shares of Nexen in the days leading up to the July 23 announcement of a $15.1-billion takeover offer from state-owned oil firm China National Offshore Oil Company (CNOOC).
The $27.50 purchase price CNOOC is offering for Nexen shares represents a 60 per cent premium to what the company was worth before the offer became public.
The SEC says Well Advantage bought 830,000 shares of Nexen on July 19 and made a paper profit of $7.2 million after the deal was announced a few days later. Other Singapore and Hong Kong-based traders bought 676,000 Nexen shares in the days before the announcement, and after selling their shares, pocketed $6 million.
"The timing, size and profitability of these trades, as well as the lack of prior history of significant trading in Nexen stock in the account, make these trades highly suspicious," the SEC said in a U.S. court filing.
A judge granted the regulator permission to freeze up to $38 million worth of assets belonging to the trading firms in question.
Well Advantage is controlled by prominent Hong Kong businessman Zhang Zhi Rong.
In September, Forbes magazine calculated Zhang's fortune to be $2.6 billion, making him the 22nd richest person in China.
Zhang also heads up another company, China Rongsheng Heavy Industries Group Holdings Ltd., which has a “strategic co-operation agreement” with CNOOC, the SEC says. ]
Rongsheng shares lost roughly 20 per cent of their value following news of the SEC investigation.