Friestad said the cases come in response to increased globalization, especially takeovers that involve foreign or American companies trading on U.S. exchanges. Also, traders can more easily buy and sell securities through online brokers while masking their identity through offshore firms, he said.
In some instances, overseas traders simply abandon funds frozen in the U.S., he said. But the SEC doesn’t always prevail, either. Traders won outright in several recent cases, and in some instances the agency has returned a portion of the frozen funds to the defendant as part of a settlement.
The broader U.S. government crackdown on insider trading has led to civil or criminal cases against 449 people over the past five years, according to data compiled by Bloomberg. That includes 125 people this year, up from 56 in 2008. Almost all live in the U.S.
Foreign, Domestic
In cases against U.S. residents, regulators and prosecutors may spend many months or years assembling documents and questioning witnesses to develop evidence showing that a trader used illicit tips from friends, family or business associates.
In the foreign cases, though, the SEC typically goes to court within days of a market-moving announcement, usually using its own trading data or information from the Financial Industry Regulatory Authority or the Options Regulatory Surveillance Authority. The goal is to win an asset freeze and block the investor -- whose identity may or may not be known -- from moving cash overseas before the trades settle.
“If you fail to prevent the money from going offshore, you can do an investigation and never be able to hold those people accountable,” Hawke said. “We would be criticized if we failed to file a case, money went offshore, and it turned out those were the proceeds from an insider trading case.”
Hong Kong
The SEC won a $14.2 million settlement last month from Hong Kong-based Well Advantage Ltd. The defendants included unknown traders in Hong Kong and Singapore of securities for Calgary-based Nexen Inc.
Regulators accused them of buying Nexen shares on the New York Stock Exchange before an announcement of the company’s acquisition by Cnooc Ltd., China’s largest offshore oil and gas explorer. The Well Advantage settlement came after the SEC won an order freezing more than $44 million in assets held by all the defendants.