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From Securities Regulation Daily, September 5, 2013

SEC, Thai trader settle Smithfield insider trading case for $5.2 million

By Amanda Maine, J.D.

The SEC announced that it had reached an agreement with a trader based in Thailand whose investment in Smithfield call options resulted in a 3,400 percent return because he had obtained inside information that Smithfield Foods, Inc. would be acquired by Shuanghui International Holdings, the largest ever acquisition of a U.S. company by a Chinese buyer. The trader agreed to pay $5.2 million to settle charges of insider trading.

Background. Smithfield Foods, the world’s largest pork producer and processer, announced on May 29, 2013, that Shuanghui would acquire it for $4.7 billion. According to the SEC, Badin Rungruangnavarat, a resident of Thailand, purchased thousands of Smithfield out-of-the-money call options, which represented a substantial majority of the total cleared volume of those securities through the month of May. He “essentially cornered the market” in Smithfield call options and futures contracts, the SEC alleged. Smithfield stock, on the announcement of the proposed acquisition, increased to $33.35 per share. Rungruangnavarat’s unrealized gains were over $3.2 million, a return of more than 3,400 percent, the SEC alleged in its initial complaint seeking to freeze Rungruangnavarat’s assets. The SEC maintained that Rungruangnavarat was tipped about the potential acquisition of Smithfield and cited as a possible tipper a Facebook friend of Rungruangnavarat’s who is an associate director at the Thai investment bank that was an adviser on the contemplated Smithfield bid.

Settlement. Rungruangnavarat agreed to settle the matter with the SEC by paying $5.2 million, which includes $3.2 million in disgorgement and a $2 million penalty. He also agreed to be enjoined from future violations of Exchange Act Section 10(b) and Rule 10b-5. Rungruangnavarat did not admit or deny the SEC’s allegations.

The case is No. 13 cv 4172.

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