POLICE and corporate regulators have raided homes and businesses to smash a crime syndicate that launders money through the sharemarket after getting inside tips from leading investment banks.
The crime ring, whose network extends from NSW to Western Australia, uses young people with little means to extract cash from ATMs after successful share trades executed through the Commonwealth Bank’s online broker, Commsec.
Police raided the homes of two employees of Deutsche Bank on April 9 searching for email and phone records and documents in connection with the WA syndicate. They were searching for trades in brewing giant Lion Nathan before an $8 billion takeover bid by the Japanese brewer Kirin.
Shares in Lion shot up from $8 to more than $11 in late April last year when the deal was announced, delivering a stellar profit to those who had bought shares before the announcement. Among those who profited are those with links to organised crime in WA.
Deutsche is not suspected of any wrongdoing and is co-operating with authorities. The bank was, on the same day as the raids, issued with a notice to produce information by ASIC, which it complied with.
In late May last year, regulators from the Australian Securities and Investments Commission were alerted to suspicious trading in Caltex shares. Caltex’s share price rose from $11 to $12 on news that it intended to buy Mobil’s petrol stations.
Another leading investment bank, UBS Australia, has been the subject of preliminary ASIC inquiries in connection with the Caltex trading but has not been issued with a notice to produce. One of its employees is alleged to have provided information to the syndicate about Caltex before the announcement. The bank itself is not suspected of any wrongdoing.
The Caltex deal was later blocked on competition grounds but a taskforce from ASIC homed in on one $500,000-plus trade where parties linked to the crime syndicate had benefited. Sources said the syndicate members relied on young people of little means to remit the cash by withdrawing $1000 amounts – the daily limit – from ATMs.
This was a method, said the source, of laundering money from illegal activities. Police from the Tactical Response Group are believed to have also raided homes in Perth in connection with the irregular trades.
Commsec and Deutsche Bank declined to comment on the investigation.
The trading in Lion and Caltex shares is one part of a wide-ranging investigation into insider trading in which a number of companies and individuals have been issued with notices to produce information. The crime syndicate is believed to have garnered trading tips from a number of sources and traded in many different shares on the stock exchange.
The trading has been conducted through what are thought to be fake company names along with fictitious names of individuals behind them.
Insider trading is hard to prove because tips are mostly provided by word of mouth and there is rarely a paper trail to produce in evidence.