U.S. SEC drops Onyx insider trading lawsuit against Dubai men

By Jonathan Stempel

NEW YORK (Reuters) - A federal judge on Wednesday dismissed the U.S. Securities and Exchange Commission's lawsuit accusing two Dubai men of insider trading in Onyx Pharmaceuticals Inc while the cancer drugmaker was mulling a takeover bid by Amgen Inc .

U.S. District Judge Paul Oetken in Manhattan granted the SEC's request to end its two-year-old case against Dhia Jafar and Omar Nabulsi without prejudice, and lift a $2.55 million asset freeze on two accounts they held at Citigroup.

The SEC did not explain why it wanted the dismissal, which it requested in a Tuesday court filing.

"It came out of the blue," Patrick Smith, a lawyer for the defendants, said in an interview. "They called us and said they wanted to dismiss the case. I think it is an admission on their part that they had no evidence that my clients committed insider trading. It's a shame because it was a long time coming."

Oetken in June rejected the defendants' bid to dismiss the case in light of a December 2014 decision by the 2nd U.S. Circuit Court of Appeals that narrowed the definition of insider trading.

The judge nonetheless said that decision, known as the Newman case, "may make it more difficult" for the SEC to prevail against Jafar and Nabulsi.

SEC spokeswoman Judith Burns declined to comment.

Jafar's and Nabulsi's accounts were frozen in July 2013, soon after the SEC uncovered what it called suspicious trading in Onyx call options on June 26 and 28 of that year.

Onyx on June 30 said it rejected an unsolicited $10 billion bid from Amgen, and would put itself up for sale. Its shares soared more than 51 percent the next day. Onyx was ultimately bought by Amgen.

Jafar and Nabulsi have maintained that they did nothing wrong, and had frequently traded in stock options.

Smith said the Newman decision was "helpful," but that the SEC "never had a tipper" or evidence that his clients received inside information.

"On one level my clients are pleased the case is over, but they still wonder how they're going to get their reputations back," he said.

The case is SEC v. Jafar et al, U.S. District Court, Southern District of New York, No. 13-04645.

(Reporting by Jonathan Stempel in New York; Editing by Tom Brown)