The Securities and Exchange Commissionannounced that two Brazilian men will pay nearly $5 million to settle charges that they made nearly $2 million trading in advance of Warren Buffett’s acquisition of H.J. Heinz Company. Rodrigo Terpins and his brother, Michael Terpins, agreed to settle the SEC’s charges by disgorging the entire amount of illegal profits from their timely trades - which amounted to nearly $2 million – as well as $3 million in civil penalties. The two have also agreed to the entry of an injunction enjoining them from future violations of federal securities laws.
According to the Commission, Michael Terpins learned that an investment consortium headed by Buffett’s Berkshire Hathaway and 3G Capital had agreed to acquire Heinz in a $28 billion deal. This information was passed along to Rodrigo Terpins while he was vacationing at Walt Disney DIS +1.93%World in Orlando, Florida, who then instructed his broker to purchase over 2,000 out-of-the-money options bets that the price of Heinz common shares would rise dramatically in a short period of time – despite his broker’s recommendation that his investment firm recommended the sale of Heinz shares. These trades were made through a Cayman Islands account in the name of “Alpine Swift,” which holds assets for the Terpin family, and were then executed through an omnibus account at a Goldman Sachs omnibus account in Zurich, Switzerland.
Several days after the trades were placed, the announced acquisition caused Heinz shares to skyrocket, and resulted in a nearly-2,000% increase in the value of the options purchased by Terpin. In an unusually swift action, the Commission filed an emergency enforcement action just days after the suspect trades in order to freeze trading profits.
As part of the settlement, the Terpins neither admitted nor denied the allegations in the Commission’s complaint.
Follow Jordan Maglich on Twitter at @PonziTracker.
A copy of the SEC’s Complaint is here.
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