WASHINGTON Two brothers from Brazil will pay $5 million to settle civil charges that they reaped $1.8 million in illegal profits by trading ahead of an announcement that Berkshire Hathaway Inc (BRKa.N) and 3G Capital planned to acquire ketchup-maker H.J. Heinz, the U.S. Securities and Exchange Commission said on Thursday.
Earlier this year, the SEC froze their assets in a Swiss-based account after detecting suspicious options trading before the $28 billion deal was announced. At the time, their identities were unknown.
The SEC said in its announcement Thursday the brothers used a family-owned Cayman Islands entity Alpine Swift to purchase $90,000 in options positions a day before the takeover was announced. After the announcement, the positions' value increased 2000 percent.
The Terpins brothers neither admitted nor denied the Securities and Exchange Commission's charges. Lawyers for the two did not immediately respond to requests for comment.
The SEC is alleging that Rodrigo Terpins placed the illegal trades while vacationing at Walt Disney World in Orlando after his brother passed along a tip about the acquisition. According to Thursday's announcement the broker Terpins used to place the trades warned his firm had given Heinz a "sell" rating, but Terpins directed him to make the trades anyway.
"Those who use foreign accounts to commit insider trading in the U.S. markets should know that their activities can still be tracked and they will be held accountable by the SEC for their actions," said Sanjay Wadhwa, Senior Associate Director for Enforcement in the SEC's New York Regional Office.
The trades in question attracted a great deal of attention at the time of the Heinz takeover because they stood out plainly in the trading that took place ahead of the announcement.
"The timing, size, and profitability of the trades as well as the lack of a prior history of Heinz trading in the Alpine Swift account made the transactions highly suspicious in the wake of the Heinz announcement, hence the SEC's emergency action at the time," the SEC said in its release on Thursday.
(Reporting by Sarah N. Lynch and Emily Flitter; Editing by Gerald E. McCormick and Alden Bentley)