The U.S. Securities and Exchange Commission Thursday charged a Kuwait-based trader and three related foreign entities with making millions of dollars in trading profits following the dissemination of false news about two U.S. companies.

The SEC's civil lawsuit, filed in a Manhattan federal court, accuses Hazem Khalid Al-Braikan, United Gulf Bank, Kipco Asset Management Co. and Al-Raya Investment Co. of trading based on a fake press release claiming that a Middle Eastern investment group planned to acquire Harman International Industries Inc. (HAR).

The fake press release was transmitted via facsimile to media outlets on July 19, causing Harman's share price to climb by more than 40% in pre-trading the following day, the SEC said. Harman's share price later dropped after the company repudiated the announcement.

Al-Braikan and the other foreign companies amassed massive positions in Harman's common stock and call options in the four days before the fake announcement went out, allowing them to reap millions of dollars, the SEC claims.

The lawsuit also claims that two of those foreign entities profited back in April after a Kuwaiti newspaper falsely reported that some Middle Eastern companies were trying to purchase Textron Inc. (TXT). Al-Braikan amassed numerous positions before the fake story ran, then sold the Textron holdings at an inflated price.

The SEC doesn't allege that Al-Braikan or any of his associates were responsible for disseminating the phony news. The agency declined to comment on whether or not it is trying to determine the source of the press release, saying only that its investigation into the case is ongoing.

Al-Braikan, according to the SEC, resides in Kuwait and is chief executive of Al-Raya Investment Company. United Gulf Bank is the investment-banking arm of Kuwait Projects Company.

There was no attorney on record for any of the defendants, and no one could be reached at Gulf Bank or the Al-Raya Investment Management Co.

"This case exemplifies the SEC's swift and surgical investigative skills and our determination to follow the trail wherever it leads," said Robert Khuzami, director of the SEC's Division of Enforcement.

The SEC said it has already received an emergency order to freeze more than $5 million in trading profits sitting in various U.S. accounts in the defendants' names.

-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com