I Confess

Federal securities regulators filed an insider-trading lawsuit in Chicago federal court today, alleging that as-yet-unidentified buyers used overseas accounts last month to make "highly profitable and suspicious" options trades that set them up for millions of dollars in profits when TXU Corp. announced publicly it had agreed to be acquired by private-equity interests.

Indeed, the SEC said in a release, the U.S. District Court in Chicago has entered a temporary restraining order that freezes $5.4 million in assets that belong to the unknown purchasers.

The SEC's lawsuit says the identity of the options buyers isn't yet known "because they made their purchases in accounts through several foreign brokerage firms." Those brokerage firms in turn cleared the trades through several U.S.-based brokerage firms, "which in turn executed the purchase orders through the facilities of the Chicago Board Options Exchange."

The just over 8,000 call options that the defendants purchased through their "unlawful trading activity" in a period from Feb. 21 through Friday, Feb. 23, positioned the buyers to reap more than $5.3 million in trading profits, according to the SEC.

The suit says the buyers violated federal securities law because they were making trades "while in possession of material, non-public information." In other words, the government alleges, they had either been tipped off or otherwise learned that TXU was in final-stage negotiations, days before the deal was actually announced.

---Okay, ya got me, dammit. I confess, where do I sign? Unfortunately, I've destroyed the paper trail, and no one other than myself was involved. I overheard guys from TXU, at lunch, discussing the acquistion and I couldn't help myself. I will do my 5 Martha months, minimum security jail time + $30K fine, just as soon as you unfreeze that $5.4 mil and deposit in my personal checking account. P.S. I am ashamed, shattered, and remorseful.