The SEC believes that some traders got ahold of a hot tip on Amgen's ($AMGN) quiet $10 billion bid for Onyx Pharmaceuticals ($ONXX) and made a quick killing. And regulators wasted no time in hammering back, asking the courts to freeze the funds and go after the unidentified group for insider trading.
The SEC took action just as the markets were settling in for the July Fourth holiday Wednesday evening. In its lawsuit, the commission outlined a series of suspicious trades, beginning with a trade on June 26, the day Onyx's board reviewed the bid. The traders--using offshore accounts in the Canary Islands and Beirut--purchased dozens of call options at $80 and $85, a huge spike in the usual kind of activity seen around Onyx's shares. And the suspicious trades continued on June 27 and then June 28, the day the Financial Post in Canada got ahold of Amgen's buyout offer.
Once the news hit on the 28th and the biotech quickly rejected the overture as inadequate, Onyx's shares gyrated up 51% on the next trading day. Now Onyx is on the auction block and the feds are tracking down the traders who appear to have had the inside scoop.
"In all, Defendants collectively paid $305,000 for the options purchased on June 26, 27 and 28, the three days leading up to the Announcement," the SEC alleges. "They generated profits of $1.1 million from the call options purchased on June 26, over $2.3 million from the options purchased on June 27, and over $1.1 million from the options purchased on June 28."
The SEC has had its radar tuned for suspicious biotech trades. In the past year it's filed a series of actions against industry insiders who took their knowledge of prospective acquisitions and scored some quick gains--only to find themselves caught up in the federal dragnet.
- here's the SEC lawsuit
- here's the AP report