| NEW YORK
NEW YORK Nov 22 Two traders have won the
dismissal of a U.S. Securities and Exchange Commission lawsuit
accusing them of insider trading in Onyx Pharmaceuticals Inc as
the company considered a takeover bid from rival Amgen Inc
The decision by U.S. District Judge Paul Oetken in
Manhattan, made public Friday, marked a setback in what has
become an increasingly common tactic by the SEC of freezing the
accounts of unknown traders engaged in suspicious trading
The SEC filed its lawsuit against unknown traders on July 3,
targeting three trades between June 26 and 28 that the
commission called "suspicious."
Soon afterward, the agency won orders freezing about $4.6
million held in accounts at Citigroup Global Markets Inc and
Barclays Capital Inc holding $4.6 million made on the trades.
Dhia Jafar and Omar Nabulsi, both of Dubai, stepped out of
anonymity on July 23, saying they made the trades in the
Citigroup account. They denied wrongdoing and requested the
lawsuit be dismissed.
Oetken granted their motion to dismiss, saying the facts
alleged by the SEC "are insufficient to support a reasonable
inference of insider trading" in advance of news of Amgen's $10
"There is no indication that the SEC knows whether material
nonpublic information was tipped, who did the tipping, or who
received the tip," Oetken said.
According to the SEC, the trades started the day Onyx's
board of directors voted to reject an unsolicited offer from
Amgen. News of Amgen's offer broke two days later, and Onyx
announced the board had rejected the offer on June 30.
Almost a month later, Onyx agreed to be bought by Amgen for
about $10.4 billion.
'ALL BELIEF AND NO INFORMATION'
In his ruling, Oetken said many of the SEC's allegations
were "all belief and no information" and the facts did not
support an inference of insider trading.
The size and riskiness of the trades also did not support
the SEC's argument, the judge said. And the SEC had not
identified anyone who might have been the tipper, Oetken wrote.
"Even if there was a tip - which it is not reasonable to
infer from these facts alone - the SEC's allegations do not
support a reasonable inference that the tip was in violation of
a fiduciary duty, much less that the Defendants knew or should
have known about the violation," Oetken wrote.
The judge, however, said he would permit the SEC to file an
amended complaint and left a modified freeze order in place for
If the SEC does not file an amended complaint within 30
days, Oetkin said he will lift the freeze order. The judge
modified the order to cover only $2.53 million in the Citigroup
account, the amount Jafar and Nabulsi say they made on the
trades at issue.
Kevin Callahan, a spokesman for the SEC, said the agency was
"pleased the freeze is still in place for 30 days and we're
reviewing the decision."
Patrick Smith, a lawyer who represented Jafar and Nabulsi,
said the ruling would make it harder for the SEC to pursue cases
if once-unknown traders step forward.
"If all the SEC has is the fact of the trade which they
argue appears suspicious, they're not going to have adequate
basis to allege insider trading," he said. "They're going to
need to have something more."
The ruling came in one of several lawsuits the SEC has
pursued in recent years seeking asset freezes in cases where it
suspects insider trading but cannot immediately identify the
In February, the SEC filed a similar lawsuit to freeze
assets after detecting suspicious options trading before an
announcement that Berkshire Hathaway Inc and 3G Capital planned
to acquire ketchup-maker H.J. Heinz.
Last month, two brothers from Brazil, Rodrigo Terpins and
Michel Terpins, agreed to pay $5 million to settle that lawsuit.
The case is SEC v. One or More Unknown Traders in the
Securities of Onyx Pharmaceuticals Inc, U.S. District Court,
Southern District of New York, No. 13-04645.