(CN) - While Canadian and American politicians ponder and posture about the implications of a state-owned Chinese oil firm making a bid for Canada's Nexen Inc., the Securities Exchange Commission filed a complaint against Hong Kong-based Well Advantage and other traders alleging insider trading that reaped more than $13 million in illicit gains ahead of the announcement of Chinese National Offshore Oil Company's $15 billion bid for Calgary, Alberta-based Nexen.
     On July 27, The SEC implemented an emergency court order to enjoin the traders from destroying evidence and to freeze their accounts worth over $38 million.
     The complaint, filed in U.S.D.C. Southern District of New York, claims Well Advantage, owned by Chinese billionaire Zhang Zhi Rong, and certain unidentified traders relied on inside information to purchase Nexen stock prior to the July 23 bid announcement where CNOOC is attempting to acquire Nexen for $15.1 billion. Consummation of the merger would make it the largest foreign takeover by a Chinese entity.     
     Nexen's stock rose approximately 52 per cent higher to close at $25.90 after the announcement.
     According to the complaint, the "highly suspicious and highly profitable trading" was conducted by traders in Singapore and Hong Kong through accounts held by Phillip Securities and Citibank while Well Advantage made trades through UBS Securities and Citigroup Global Markets.
     The accounts had little or no prior history of buying Nexen stock. Well Advantage had not traded Nexen stock since January 2012 and its Citigroup account had been dormant for over six months.
     Zhang Zhi Rong is the controlling shareholder of China Ronsheng Heavy which has close business ties with CNOOC, the SEC alleges.
     The Commission says traders at Well Advantage bought more than 830,000 shares of Nexen on July 19 and the unknown traders purchased more than 676,000 shares days before the announcement. Both groups made $7 and $6 million respectively after subsequently liquidating their Nexen stock on inside information of the CNOOC and Nexen merger.
     "Well Advantage and these other traders engaged in an all-too-familiar pattern of misusing inside information to place extremely timely trades and profit handsomely from their illegal acts," said Sanjay Wadhwa, Deputy Chief of the SEC Enforcement Division's Market Abuse Unit and Associate Director of the New York Regional Office.
     The SEC is seeking a final judgment ordering the defendants to return "all illicit trading profits or other ill-gotten gains" in addition to paying civil monetary penalties.
     The commission is represented by Sanjay Wadhwa in New York.
     Of counsel includes Daniel M. Hawke, Joseph G. Sansone, Simona K. Suh, Charles D. Riely, and Michael P. Holland.