Cedrus Invest Bank client implicated in insider trading. Bank not named as defendant

Cedrus Invest Bank client
implicated in insider trading
Bank not named as defendant
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The United States’ Securities and Exchange Commission (SEC) has filed a legal case against unknown defenders, including a customer of Cedrus Invest Bank, on suspicions of insider trading in call options. The Cedrus client has realized a potential profit of around $527,000, according to SEC.

Contrary to rumors and some press reports, The Chairman of Cedrus, Fadi Assali, said that the bank has nothing to do with this issue and will not be affected by it. The deal involves the customer buying call options for $23,000, selling them for more than $500,000.

“These things happen. We have informed the Central Bank’s Special Investigation Commission (SIC) about this matter,” Assali said.

SIC confirmed that a legal case has been filed against the customer and not against Cedrus, he said.

A financial company, acting on behalf of one of its customers, mandated Cedrus to buy the call options. According to Assali, Cedrus purchased the options in its capacity as a broker and does not know the identity of the suspected customer due to the banking secrecy law.

The transactions were executed through Cedrus’ trading account at U.S.-based Interactive Brokers LLC.

“The Cedrus trading account purchased 540 out-of-the-money call options between March 20 and March 29, 2017. The account subsequently sold these options for a potential profit of $526,925,” the SEC said.

The deals, involving call options of General Communication, Inc. (GCI), were carried out “just prior to the April 4, 2017 announcement that GCI had entered into an agreement to be acquired by Liberty Interactive Corporation,” SEC said.

SEC said that one or more customers of Nomura International were also involved in a similar suspicious insider trading transaction pertaining to call options of GCI. The SEC said it has not yet been able to identify the suspected customers of both Cedrus and Nomura.

The suspects “purchased GCI calls while in the possession of material, nonpublic information concerning the proposed acquisition of GCI,” according to the legal case filed by SEC.

“The defendants' purchases occurred while GCI and Liberty were in talks regarding Liberty acquiring CGI,” the SEC said.

The SEC said that the trades carried out by the defendants are highly suspicious because of the timing, size, and profitability realized, as well as by the lack of prior history of significant trading in GCI securities.

The announcement of the acquisition agreement between GCI and Liberty allowed the defendants’ combined initial investment of $48,109 to appreciate to over $1 million, according to SEC.
Reported by Shikrallah Nakhoul
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Date Posted: Apr 26, 2017