U.S. securities regulators are alleging that illegal insider trading took place in Placer Dome Inc. options ahead of Barrick Gold Corp.’s bid for the firm.

The Securities and Exchange Commission reports that the Honorable George Daniels, U.S. District Judge for the Southern District of New York, has entered a temporary restraining order freezing assets of certain ‘unknown purchasers’ of call options for the common stock of Placer Dome. The SEC’s complaint alleges that these unknown purchasers engaged in illegal insider trading.

In addition to freezing approximately US$3 million in assets, the court’s order requires that the unknown purchasers identify themselves, provides for expedited discovery, and prohibits the defendants from destroying evidence.

The commission’s complaint alleges that on October 31, prior to the opening of the market, Barrick Gold announced that it was making an offer to purchase Placer Dome for US$20.50 per share. As a result, Placer stock jumped to open at US$19.82 per share, a 20% increase over its prior closing price on Oct. 28. The SEC alleges that on October 25 and 26, while in possession of material, nonpublic information regarding this acquisition offer, the ‘unknown purchasers’, using overseas accounts, bought over 10,000 call option contracts for Placer stock in an account at a broker dealer in the United States.

The complaint alleges that over 5,000 of the call option contracts were ‘out of the money’ and set to expire in November, within weeks of the purchase date. It also alleges that, as a result of the increase in price of Placer stock following the announcement, the unrealized illicit profits on these option contracts total over US$1.9 million.

The SEC is seeking permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and civil monetary penalties.