At the centre of the insider trading are KenolKobil CEO David Ohana, Mr Andre DeSimone, the chief executive of stock brokerage firm Kestrel Capital and Aly-Khan Satchu, a stock market analyst and CEO of Rich Management.
According to court papers filed by CMA, the capital markets regulator reckons that privileged trading in the oil marketer’s shares ahead of last year’s announcement of a Sh35 billion ($350 million) takeover by French company Rubis Energie stood to benefit the company CEO, Mr DeSimone and Mr Satchu.
In 2018, Rubis Energie, which already owns a 25 per cent stake in KenolKobil (367.8 million shares), which it bought from Wells Petroleum in October 2018 at Sh15.30 per share for a total of Sh5.63 billion proposed to pay Sh23 a share for the remaining 75 per cent stake, valuing the company at Sh35.7 billion.
The board of NSE-listed oil marketer have already endorsed the proposed takeover of the firm by the French company.
The regulator has its eyes fixed on the fact that buyers of the shares stand to earn about Sh588 million ($5.88 million) once the takeover is complete, taking into account the Sh8 premium on Rubis’ offer price of Sh23 valuing the suspect shares at Sh1.53 billion.
According to the CMA filings Mr Satchu allegedly contacted several traders informing them of the intended takeover announcement.
These traders then purchased 62.6 million KenolKobil shares worth Sh938.3 million ($9.383 million) with the potential to make a profit of Sh503.7 million ($5.037 million) once the deal was sealed.
CMA says Mr Satchu was allegedly in close contact with Mr DeSimone during the period a majority of the frozen shares were traded through Kestrel Capital.
Mr Satchu has, however, denied any form of insider trading and says he had already set his sights on KenolKobil shares before the announcement of a proposed takeover of the company was made public.
“I have watched KenolKobil since 2007. I have been studying their share since then and there is a record on my website of my thoughts,” said Mr Satchu.
Mr Satchu went ahead and said that he only spoke to Mr Ohana when he interviewed him in 2017 and to Mr DeSimone whenever registering new clients in his capacity as an agency of his stock brokerage firm.
That coupled with his real-time tracking of the stock exchange market informed his decision to advise his clients to purchase KenolKobil shares.
The clients in question, which CMA is seeking clarification from Mr Satchu, are Mr Abdul Hameed Sheikh, Jamal Farzeen, Radia Kantilal and Tiwari Simon, all of whom acquired many shares days before the Rubis Energie offer was made public.
Subsequently, the regulator blocked the 14 accounts which it suspects engaged in the illegal trading.
Mr Satchu however, claims that all of them have been either his long-term clients or friends that he had advised on acquiring either KenolKobil or Safaricom shares and refers to them as ‘sophisticated investors’ who are able to make informed decisions.
Mr Satchu has since filed an application challenging court orders that allowed the regulator to seize his mobile phone and other electronic devices.
On January 14, CMA obtained court orders to seize electronic devices from Mr Satchu, Mr Ohana and Mr DeSimone to retrieve information the regulator wants to use to build its case of insider trading against them.
However, in a sad twist of events synonymous with white collar crimes captured in Hollywood’s movies, the regulator told the court that Mr Ohana and Mr Andre DeSimone deleted selected text messages and call logs just hours before detectives raided their offices, in what they believe someone gave them a tip-off on the impending raid, leading them to clean their devices ahead of the raid and seizure of documents.
"It is the belief of the applicant that considering that it has been possible to successfully extract information from all other devices whilst it has not been possible to extract information from the electronic devices under paragraph 4 above, deliberate efforts may have been made to update, programme and/or calibrate the said devices with the objective of frustrating the applicant’s data and information extraction process," says the CMA in the latest court filing.
The devices that were allegedly altered are a Samsung mobile phone and MacBook Pro laptop seized from Ohana and a blackberry mobile phone seized from Mr DeSimeone. Other gadgets seized were an iPhone and a laptop belonging to Aly-Khan Satchu.
Some sources familiar with the ongoing investigations, however, say the investigators managed to retrieve the deleted information, including e-mails, text and WhatsApp messages from the devices.
East African Data Handlers, an IT firm, has been hired by the regulator to assist with the investigations.
The regulator asked for a three-day extension of a court order it had earlier obtained to detain the devices to give it more it time to extract information from the gadgets that had been allegedly interfered with.
Senior resident magistrate Peter Muholi on January 23 granted the CMA three more days to retrieve information from the devices.
Mr Satchu now wants the court to lift these orders arguing that they allowed the CMA to get access to his mobile phones and other devices infringe on Article 31 of the Constitution that guarantees his right to privacy.