SPAC Trades May Have Made 888% Profit. Some Face SEC Scrutiny

A pattern of prescient and potentially very lucrative trading has taken shape on a once-obscure corner of Wall Street—and U.S. investigators are suspicious.

The setting is the world of special-purpose acquisition companies, or SPACs, the shell corporations that have flooded onto markets in recent years to raise money from investors and then hunt for companies to buy. The instrument is a stock warrant, which gives holders the right to buy shares at a specified price in the future. SPACs happen to issue a lot of warrants.

The curious trading pattern starts when someone buys piles of a SPAC’s warrants, sending ...