Officials Accuse Two of 'Unlawful Trading Activity' Around Dow Jones Bid

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The Securities and Exchange Commission Tuesday accused two Hong Kong residents of "widespread and unlawful trading activity" when they bought $15 million of Dow Jones & Co. (DJ)stock ahead of an announcement that News Corp. (NWS) was seeking to buy the company.

The lawsuit in U.S. District Court in Manhattan named as defendants Kan King Wong and Charlotte Ka On Wong Leung, a married couple. It alleged they made "highly profitable and highly suspicious" stock purchases based on inside information between April 13 and April 30.

The lawsuit did not explain how the couple would have obtained inside information on the pending offer. There was no information on whether the couple has a lawyer in the United States. A message left with the SEC lawyer who filed the lawsuit was not immediately returned.

According to the lawsuit, Wong and his wife bought 415,000 shares of Dow Jones stock in the two weeks prior to the May 1 announcement that News Corp. had offered to buy Dow Jones.

The purchases occurred while the couple possessed material non-public information about the offer of News Corp. to acquire Dow Jones, the lawsuit said.

"In advance of the announcement, defendants engaged in widespread and unlawful trading activity," the lawsuit said.

After the public announcement, the value of Dow Jones stock rose 58 percent, causing the couple's Merrill Lynch & Co. (MER) account in Hong Kong to grow to $23 million, a net gain of $8.18 million.

The couple did not have enough money in their brokerage account to buy all the shares of Dow Jones stock on April 13 so $3.18 million was wired to their account five days later from the father of Charlotte, according to the lawsuit.

The lawsuit sought a court order requiring the couple to give up all profits and pay civil penalties.

Jeffrey Lerner, a spokesman for the New York attorney general, Andrew Cuomo, declined comment Tuesday on the allegations against the Wongs.

Federal and state authorities have said they are investigating suspicious options trading in Dow Jones stock prior to the announcement of News Corp.'s $5 billion bid for the financial news publisher.

News last Tuesday of the $60-per-share bid by Rupert Murdoch's company sent Dow Jones shares soaring.

A spokesman for Dow Jones, which publishes The Wall Street Journal, said Monday that it has received a subpoena from the New York attorney general's office and a request for information from the Securities and Exchange Commission regarding options trading.

Dow Jones will "cooperate fully" with the authorities, company spokesman Howard Hoffman said.

Murdoch's bid has been opposed by Dow Jones' controlling shareholders, the Bancroft family, but the family has been divided over the offer.