What you need to know:
- CMA suspects that stock market trader Aly-Khan Satchu recommended to Kestrel unsolicited clients who later purchased huge quantities of KenolKobil shares based on the takeover information that was not in the public domain.
- The CMA suspects the 66.8 million suspect shares worth Sh948.5 million traded between October 15 and October 23 were based on non-public information on the takeover.
- Kenolkobil traded 291,900 shares in the week preceding October 15, reflecting the share buying frenzy.
Investigators looking into suspected insider trading in KenolKobil shares have established that stock market trader Aly-Khan Satchu and the CEO of stock brokerage Kestrel Capital were in communication ahead of the oil marketer's Sh35 billion takeover announcement.
The Capital Markets Authority (CMA) told the court it learnt of the communication between Mr Satchu and Mr Andre DeSimone, the CEO of Kestrel Capital, after it confiscated their phones and laptops on January 15.
The regulator suspects that Mr Satchu recommended to Kestrel unsolicited clients who later purchased huge quantities of KenolKobil shares based on the takeover information that was not in the public domain.
“The investigations by the applicant have so far established communication between the 1st respondent (Mr Simone) and the 2 respondent (Mr Satchu) during the material time and before the insider information was made public,” CMA lawyer Timothy Githendu told the court
“The authority reasonably believes that the respondents are in possession of documents which are likely to contain information relevant to the investigations.”
Besides Mr Simone and Mr Satchu, the CMA also seized the phones and laptops of KenolKobil CEO David Ohana as it expanded the scope of its investigations.
The CMA tapped computer forensic firm, East African Data Handlers, for KenolKobil assignment and the company retrieved information from e-mails, computer hard drives and messaging systems such as WhatsApp.
The firm has the ability to recover altered or deleted electronic data that is now helping the CMA build insider trading case against three CEOs.
The CMA suspects the 66.8 million suspect shares worth Sh948.5 million traded between October 15 and October 23 were based on non-public information on the takeover.
Kenolkobil traded 291,900 shares in the week preceding October 15, reflecting the share buying frenzy.
The CMA reckons the movers of the suspect share dealings stand to gain more than Sh500 million in profit once they transfer the stocks to French firm Rubis Energy, which announced on October 23 that it is taking over KenolKobil.
This emerged as Mr Satchu’s lawyer Ahmednasir Abdullai mocked the CMA over the investigation via Twitter, terming it a “newspaper regulator” who plants false stories.
Mr Abdullai’s tweet was triggered by the Business Daily‘s Tuesday story revealing the seizure of the phones.
The authority suspects Mr Satchu had prior knowledge of the deal before recommending five traders to Kestrel to buy KenolKobil shares.
The regulator’s unprecedented use of mobile forensic--electronic data gathering for legal evidence use that is often deployed in pursuit of terrorists and drug trafficking probes—will mark a turning point in the prosecution of white collar crimes.