US authorities probe trades in Heinz shares

City A.M. Reporter

US securities regulators have filed a lawsuit against unknown traders in the options of ketchup maker HJ Heinz.

The Securities and Exchange Commission (SEC) alleges that traders acted on inside information before Heinz announced a deal to be acquired for $23bn (£14.8bn) by Warren Buffett’s Berkshire Hathaway and Brazil’s 3G Capital.

The suit marks the second time in six months that the SEC has taken legal action for alleged insider trad- ing on a 3G deal.

The suit, in federal court in Manhattan, cites “highly suspicious trading” in Heinz call options just prior to the announcement of the deal last Thursday.

The regulator has frequently in the past filed suits against unnamed individuals where it has evidence of wrongdoing, but is still trying to uncover the identities of those involved.

That trading, the suit said, caused the price of the particular call option they bought to soar 1,700 per cent and generated unrealised profits of more than $1.7m.

The regulator claims the traders are either in, or trading through accounts in, the Swiss city of Zurich. The account had no history of trading in Heinz over the last six or so months.

It has also obtained an emergency order to freeze assets in the Swiss account linked to the trading. In the suit, the SEC refers to the account as the “GS Account”. In a statement Goldman Sachs said it was cooperating with the regulator's investigation.

“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 Hawke, chief of the SEC’s division of enforcement’s market abuse unit said in a statement.