SEC Alleges Insider Trading Ahead of Chevron Anadarko Announcement

The Securities and Exchange Commission (SEC) filed a civil lawsuit today in the Southern District of New York against “One or More Unknown Traders in the Securities of Anadarko Petroleum Corporation” alleging “highly suspicious trading” in call option contracts of Anadarko before the April 12, 2019 announcement of the agreement for Chevron to acquire Anadarko for $65 per share.

This price was substantially more than the closing price the day before and, as one may expect, increased after the announcement of the deal.  Thus, the SEC scrutinized certain “large, unprecedented purchases of Anadarko calls before the announcement.” The profits are alleged to be approximately 2.5 million dollars.

The purchases were allegedly made thru foreign investment banking firms by customers located outside of the United States.  While to the lay person, this may seem unusual, but in reality, the United States enforces its domestic laws against  foreigners, beyond well known cases against drug kingpins and terrorists.

Many British, European, and Asian individuals and corporations have found themselves sued or even indicted by the Department of Justice for conduct that affects the United States, even if it was not committed here.  Whether the United States can successfully exercise jurisdiction against them is often a hotly contested matter in the courts.

But first, in this case, the SEC will have to identify the alleged wrongdoers, and with all of the tools at its disposal, it may not be long before those individuals are identified and added to this lawsuit.  Insider trading is also a federal crime, which in additional to monetary penalties, may result in prison time and it is not unheard of for the government to pursue both criminal and civil remedies for the same conduct.

Interestingly, this suit was bright by the SEC’s Texas office.  Located in Fort Worth, it is typically where insider trading, securities fraud, and other matters within the SECs jurisdiction are handled for this part of the country.  At the end of the day, this case may feature Texas defense lawyers, too.  Occasionally, Lone Star Legal battles play out in the big apple.