The U.S. Securities and Exchange Commission (SEC) is reportedly investigating alleged insider trading that cost Susquehanna International Group millions of dollars. This probe follows a lawsuit filed by Susquehanna against 100 unnamed individuals, claiming they profited from advance knowledge of China's recent regulatory crackdown on online brokers. The crackdown specifically targeted companies like Futu and Up Fintech (operating Tiger Brokers), popular with mainland Chinese investors trading foreign stocks.
Susquehanna alleges that these unidentified traders purchased bearish put options on Futu and Tiger Brokers, which are Nasdaq-listed, just before China's financial regulator announced that these firms were operating without mainland licenses. This regulatory action on May 22, 2026, caused a sharp decline in the share prices of both brokerages, making the put options highly profitable. Susquehanna was on the opposite side of these trades, mainly placed through U.S.-based Interactive Brokers, and estimates its losses from these suspicious transactions. The firm is seeking $70 million in damages from the alleged insider traders. Some reports indicate the traders may have netted over $100 million in illicit gains.
While prediction markets like Kalshi and Polymarket have seen an increase in insider trading concerns, this case highlights that traditional stock markets remain a tempting venue for individuals with illicit advance information. The alleged gains in this case are reported to be larger than those in the Galleon insider-trading scandal, which led to Raj Rajaratnam's imprisonment. The lawsuit aims to unmask the traders and potentially freeze their accounts, bringing significant regulatory scrutiny to these types of market activities. This incident underscores ongoing challenges in preventing insider trading, especially in the context of rapidly evolving geopolitical and regulatory landscapes affecting global markets.
