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The Securities and Exchange Commission (SEC) is investigating potential insider trading of shares of Eastman Kodak Company (NYSE: KODK) prior to the company’s announcement of a $765 million loan provided by the Trump administration under a Defense Production Act deal.

Under the deal, Kodak will use the loan to produce generic drug ingredients in response to the COVID-19 pandemic.

The Wall Street Journal first reported the SEC investigation on Tuesday, citing sources familiar with the matter.

The probe comes after Sen. Elizabeth Warren, D-Mass, a member of the Senate Committee on Banking, Housing, and Urban Affairs, called on the SEC to look into the unusual trading activity involving Kodak shares before the announcement on July 28.

Sen. Warren concerned about Kodak executives’ stock purchase

In her letter to SEC Chair Jay Clayton, Sen. Warren wrote, “There were several instances of unusual trading activity prior to the announcement, raising questions about whether one or more individuals may have engaged in insider trading or in the unauthorized disclosure of material, nonpublic information regarding the forthcoming $765 million loan awarded under the Defense Production Act."

Kodak’s stock price went up by about 20% on July 27 and more than 200% during the day the company officially announced the deal. By the end of last week, the company’s share had risen by over 500%, a boon for its executives, some of whom had received options a day before the July 28 announcement.

Sen. Warren raised concerns about the stock purchases of Kodak Executive Chair James Continenza and Board Member Philippe Katz before the deal. Based on SEC filings Continenza acquired around 46,700 additional shares while Katz bought 5,000 shares on June 23.

"The purchase of stock by Mr. Continenza and Mr. Katz while the company was involved in secret negotiations with the government over a lucrative contract raises questions about whether these executives potentially made investment decisions based on material, non-public information, and whether that material, non-public information was potentially derived from their positions as executive chairman and board member respectively," according to the Massachusetts senator in her letter.

Kodak’s shares were trading at $14.40 per share, down by more than 3% after-hours on Tuesday. Before the company’s loan disclosure, its stock price was $2.62 per share on July 27 and then climbed to $33.20 on July 29 after the announcement.

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