U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23789 / March 24, 2017
Securities and Exchange Commission v. Ariel Darvasi and Amir Waldman, Civil Action No. 17-CV-2008 (S.D.N.Y.)
SEC Obtains Asset Freeze in Suspected Insider Trading on Mobileye N.V. Acquisition
The Securities and Exchange Commission today announced it has obtained an emergency court order to freeze the assets of two Israeli traders who used brokerage accounts in the U.S. to reap nearly $5 million in trading profits in advance of the March 13, 2017, announcement that Intel Corp. had agreed to acquire Israel-based Mobileye N.V.
The SEC's emergency action to freeze the proceeds of the traders' highly suspicious transactions ensures that the potentially illegal profits cannot be removed from the accounts while the agency's investigation of the trading continues.
According to the SEC's complaint filed in federal court in New York, before market opening on Monday, March 13, Intel announced that it had agreed to acquire Mobileye through a tender offer for approximately $15.3 billion, or $63.54 per share. The announced purchase price was a 34.4 percent premium over Mobileye's closing price on Friday, March 10, of $47.27 per share. After the announcement, Mobileye opened at its high for the day, $61.51, and closed at $60.62 per share, a 28 percent increase over its March 10 closing price.
The SEC alleges that Ariel Darvasi and Amir Waldman were in possession of material nonpublic information about the impending acquisition when they purchased Mobileye securities. On the morning of March 2, Darvasi liquidated all of the securities in his account and that afternoon, he purchased 30,000 shares of Mobileye worth nearly $1.4 million. On March 13, 2017, Darvasi sold 100 Mobileye shares for a realized gain of $1,473.45. The unrealized gain on his remaining 29,900 shares is approximately $427,000.
The SEC alleges that Waldman began accumulating Mobileye call option contracts at strike prices above Mobileye's then current price starting on February 1, the same day that Intel and Mobileye executed a non-disclosure agreement. By February 28, Waldman had accumulated 7,012 call options contracts with strike prices ranging from $49 to $55. Mobileye last closed at or above $49 per share on August 23, 2016 and had not closed above $50 in the prior 17 months. Between March 1 and March 10, Waldman accumulated an additional 1,605 call options contracts with strike prices ranging from $49 to $55. As of March 10, Waldman spent $237,581 to acquire 5,339 Mobileye call options. After the announcement of the acquisition, Waldman sold 1,697 of his options contracts for a realized gain of approximately $1.54 million. Based on Mobileye's March 13 closing price, the unrealized gains on Waldman's currently held options is approximately $2.96 million.
The emergency court order obtained by the SEC freezes the traders' assets and prohibits the traders from destroying any evidence. The SEC's complaint charges the traders with violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. In addition to the emergency relief, the Commission is seeking a final judgment ordering the traders to disgorge their allegedly ill-gotten gains with interest, pay civil penalties, and be permanently enjoined from future violations.
The expedited investigation is being conducted by Kevin M. Comeau and Jay A. Scoggins of the SEC's Denver Regional Office, under the supervision of Kurt L. Gottschall, and Julie K. Lutz. The SEC's litigation is being handled by Terry R. Miller and Greg A. Kasper. The SEC thanks the Financial Industry Regulatory Authority for its significant assistance in this matter.