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US freezes traders' assets in CNOOC-Nexen deal

(Xinhua)

14:17, July 28, 2012

WASHINGTON, July 27 (Xinhua) -- The U.S. Securities and Exchange Commission (SEC) said Friday that it has obtained an emergency court order to freeze the assets of traders suspected of trading on inside information ahead of a deal between a Chinese and a Canadian oil company.

The action came four days after China National Offshore Oil Corporation (CNOOC) and Nexen announced that the former had agreed to acquire the latter for about 15.1 billion U.S. dollars.

The SEC alleged in a complaint that Hong Kong-based firm Well Advantage and other unknown traders stockpiled shares of Nexen stock based on confidential information about the deal in the days leading up to the July 23 announcement.

The commission sought the emergency action by alleging that those traders, using trading accounts in Hong Kong and Singapore, reaped more than 13 million dollars in illegal profits.

The action took place within less than 24 hours after Well Advantage placed an order to liquidate its entire position in Nexen.

In addition to freezing the assets, valued at more than 38 million dollars, the SEC is seeking a final ruling to order the traders to disgorge their allegedly ill-gotten gains with interest, pay financial penalties and permanently bar them from future violations.

Well Advantage is controlled by Hong Kong businessman Zhang Zhirong, who also controls another company named China Rongsheng Heavy Industries, which has a "strategic cooperation agreement" with CNOOC, according to the SEC complaint, filed in the federal district court in Manhattan, New York.

"Well Advantage and these other traders engaged in an all-too-familiar patten of misusing inside information to place extremely timely trades and profit handsomely from their illegal acts," said Sanjay Wadhwa, deputy chief of the SEC Enforcement Division's Market Abuse Unit.

The CNOOC-Nexen deal, if completed, would mark CNOOC's biggest foreign acquisition. Following the July 23 announcement, which came before the markets opened, Nexen's stock rose sharply that day to close at nearly 52 percent higher than Friday's closing price, said the SEC.

Well Advantage purchased more than 830,000 shares of Nexen on July 19 and had an unrealized trading profit of more than 7 million dollars based on Nexen's closing price on the day of the announcement, said the commission.

It added that the trading was suspicious because before the trade on July 19 Well Advantage had not traded Nexen shares since January.

A representative from Well Advantage could not be immediately reached for comment.

The other unknown traders used accounts located in Singapore to purchase more than 676,000 Nexen shares in the days preceding the announcement and immediately sold nearly all of the stock, raking in about 6 million dollars in illicit profits after the announcement was made public, said the SEC.

Similar to the Well Advantage trading, the unknown traders were not active in Nexen shares until they took big positions in the week before the deal was announced, alleged the SEC.

CNOOC said Friday that its bid to buy Nexen is normal market behavior and the company will strictly follow market procedures in the acquisition process.

Lv Bo, deputy general manager of CNOOC, said the company is confident about completing the deal, which is still subject to government approvals.

The deal marks another attempt by CNOOC to buy a major oil company in North America, after its failed bid to buy California-based Unocal seven years ago. The merger plan was aborted due to vehement political opposition from the United States allegedly stemming from concerns over national security.

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