A trader based in Bangkok, Thailand agreed to pay a penalty of $5.2 million to settle an insider trading lawsuit filed by the Securities and Exchange Commission (SEC) in connection with the proposed acquisition of Smithfield Foods, Inc. (NYSE:SFD) by Shuanghui International Holdings.
According to the SEC, United States District Judge Matthew Kennely for the Northern District of Illinois approved the settlement with Badin Rungruangnavarat. The Thai trader did not admit or deny the accusations filed against him.
Badin accumulated illegal profits from trading shares of Smithfield
Badin agreed to settle the case after the commission implemented an emergency action to freeze his brokerage account in the United States in June. The SEC obtained approval for the asset freeze due to concerns that Badin accumulated more than $3 million illegal profits from trading shares of Smithfield Foods, Inc. (NYSE:SFD).
According to the SEC, Badin acquired out-of-the-money call options and single-stock future contracts before Shuanghui International Holdings revealed its agreement to buy Smithfield Foods, Inc. (NYSE:SFD) for $4.7 billion on May 29. Shuanghui is the largest meat processor in China and Smithfield is the pork processor and hog producer in the United States.
The SEC believed that that Badin obtained insider information from a Facebook friend who serves as associate director at an investment bank in Thailand that was providing advice for Charoen Pokphand Foods Plc. The company was also bidding to purchase Smithfield.
Daniel M. Hawke, Chief Market Abuse Unit of SEC Enforcement Unit said, “Our quick action in June to stop Badin’s insider trading profits from leaving the U.S. made this multi-million dollar settlement possible. Once he was denied access to his trading account, Badin elected to forfeit all of his ill-gotten proceeds plus pay a $2 million penalty to settle the case against him.”
According to the commission, the $5.2 million settlement included a $3.2 million for disgorgement of ill-gotten gains and $2 million penalty. Badin agreed to permanently enjoined from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.
Shareholders of Smithfield is organizing a buyer group
Meanwhile, Starboard Value LP, the activist hedge fund headed by Jeffrey Smith and one of the largest shareholders of Smithfield Foods, Inc. (NYSE:SFD) is organizing a buyer group to submit an alternative offer for the U.S. pork processor and hog producer. The hedge fund encouraged its fellow shareholders to vote against the proposal of Shuanghui.