The Securities and Exchange Commission (SEC) has obtained an emergency court order to freeze the assets of a trader in China who profited by more than $1 million after trading in a U.S. brokerage account in advance of last week’s public announcement that China-based Qihoo 360 Technology Co. Ltd. had received a buyout offer at a significant premium from its CEO and a consortium of other affiliates.

The SEC alleges that Haijian Luo of Guangzhou, China, made bets that Qihoo’s stock price would rise in the short term and purchased approximately $700,000 of out-of-the-money call options prior to the buyout announcement.

After Qihoo’s stock price rose sharply, Luo sold all of his options and then requested that his brokerage firm wire transfer more than half of his $1 million proceeds to a foreign bank account.  Luo, who is the CEO of a Chinese online gaming company, had no prior history of trading Qihoo securities in this recently opened brokerage account.

“The suspicious timing and size of Luo’s trades spurred us to move swiftly to freeze his proceeds and ensure that potentially illegal profits cannot be siphoned out of this account beyond a U.S. court’s jurisdiction while our investigation continues,” said Andrew M. Calamari, Regional Director of the SEC’s New York office.

The SEC’s complaint filed in federal court in Manhattan charges Mr. Luo with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.

The SEC is seeking a final judgment ordering Mr. Luo to disgorge his ill-gotten gains with interest and penalties.  The emergency court order obtained by the SEC freezes the assets in Mr. Luo’s brokerage account and prohibits him from destroying any evidence.