Hong Kong, China (4E) – A company owned by Chinese real estate mogul Zhang Zhi Rong is now caught in a middle of insider trading scandal that involves the record-breaking $15.1bn acquisition of Canada-based oil and gas company Nexen by CNOOC.
The U.S. Securities and Exchange Commission (SEC) on Friday announced that an emergency court order has made a ruling to freeze the assets of Well Advantage, a company reportedly to be owned by Zhang. The company is suspected of making profits from purchasing Nexen shares ahead of last week’s announcement that the CNOOC is in the process of acquiring the Canadian energy company.
The SEC said that 830,000 shares of Nexen were bought by Well Advantage on July 19. With Nexen’s stock price rising by more than 50 per cent after the news of the acquisition broke out, that resulted to an unrealized trading profit of over $7mn. The SEC also found out that in the days leading to the announcement, other traders bought 676,000 shares of Nexen using Singapore accounts and made $6mn in profits.
The Chinese tycoon Zhang is one of China’s wealthiest businessmen where he amassed his wealth in the 1990s housing boom after making bets in real estate and construction materials.
Zhang’s $2.6bn wealth ranks him 464th in the 2012 Forbes Magazine Billionaires List.
The investigation may have spared Zhang direct participation from the scandal, although it raised concerns about his sources of income. Zhang founded and currently chairs China Rongsheng Heavy Industries, a Hong Kong- and U.S.-listed firm that has links with CNOOC since 2010, based on its latest annual report.
In a statement released Tuesday, Rongsheng’s board is confident that the SEC inquiry will not impact current business operations and relationships of the company. The same statement was also made by Glorious Property, a real estate firm where Zhang is the chairman and executive director.
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