Kuwaiti Trader Sued By SEC Over False Takeover Offers On Harman (HAR) and Textron (TXT)

Today the SEC charged a trader located in Kuwait and three related foreign entities for engaging in an illicit scheme through which they reaped millions of dollars in profits when trading around hoax offers to acquire U.S. companies.

The SEC alleges that Hazem Khalid Al-Braikan and the related entities traded around false news of a purported tender offer by a Middle East investment group to acquire Harman International Industries (NYSE: HAR). A phony announcement publicizing the hoax offer was faxed to media outlets on Sunday, July 19, and subsequently reported on the Internet. Harman's share price climbed more than 40 percent in pre-market trading on Monday, July 20.

The SEC further alleges that two of the entities similarly traded around a hoax tender offer in April 2009, when a Kuwaiti newspaper reported that a consortium of Middle East companies were offering to purchase Textron Inc. (NYSE: TXT). This offer also turned out to be false. Al-Braikan and the entities amassed positions in securities of a company shortly before a bogus offer was publicized. They then sold their securities at prices inflated by the false information to reap their illicit profits.

The SEC has obtained an emergency court order to freeze more than $5 million in trading profits located in various U.S. accounts in their names.

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