SEC Obtains Asset Freeze against China-Based Trader

The SEC obtained an emergency court order to freeze the assets of a trader in China who profited after trading in a U.S. brokerage account prior to a public announcement that Qihoo 360 Technology Co., Ltd. ("Qihoo") received a buyout offer.

According to the SEC, the trader purchased out-of-the-money call options in advance of the buyout announcement. After Qihoo's stock price rose sharply, the trader sold all of his options, after which he instructed his brokerage firm to transfer more than half of his proceeds into a foreign bank account.

The trader, who is the CEO of a Chinese online gaming company, had no previous history of trading Qihoo securities in his recently opened brokerage account. Accordingly, the SEC was compelled by the "suspicious timing and size" of the trades to "move swiftly to freeze his proceeds and ensure that potentially illegal profits cannot be siphoned out of his account beyond a U.S. court's jurisdiction."

See: SEC Complaint; SEC Press Release.