The US Securities and Exchange Commission has frozen the assets of six Chinese citizens and one company charged with insider trading in shares of Chinese meat processor Zhongpin.

The commission said the six people and the company, Prestige Trade Investment, made around US$9m by trading in the US shares of Zhongpin before it announced a plan to go private.

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Last month, Zhongpin chairman Xianfu Zhu announced he wanted to buy the company for $13.50 per share, valuing it at around $520m.

In response to the announcement, Zhongpin’s share price rose 21.8% from the 26 March close of $9.21 per share to a 27 March close of $11.22 per share.

In a filing last week, SEC said the asset freeze was needed “to prevent a group of foreign traders from absconding with millions of dollars in illicit profits from insider trading that they conducted through their US-based brokerage accounts”.

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The commission added that each defendant “knew, or recklessly disregarded, the fact that their trading was in breach of a fudiciary duty or similar duty of trust owed to the shareholders of Zhongpin”.

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The SEC said it is also seeking permanent injunctions, the surrender of gains, and financial penalties against Siming Yang, who formed Prestige Trade in March, along with Caiyin Fan, Shui Chong (Eric) Chang, Biao Cang, Jia Wu and Ming Ni.

Each of the defendants is a citizen of China or Hong Kong and lives outside the US, the SEC said.

US securities law firm Tripp Levy has said it would investigate the board of directors of Zhongpin for “possible breaches of fiduciary duty and other violations of state law”. 

It also said it would consider whether Zhu is “taking advantage of his position” to purchase the company at an unfair price.