Susquehanna International Group (SIG) has reportedly filed a federal lawsuit in New York, claiming to have lost $70 million due to alleged insider trading. The lawsuit targets 100 unnamed individuals who are accused of making over $100 million by placing bearish put options on Chinese brokerage firms prior to a regulatory crackdown by Beijing.
These trades, largely facilitated through US-based Interactive Brokers, involved options that would increase in value as the shares of Nasdaq-listed Chinese brokerages, specifically Futu and Up Fintech (parent company of Tiger Brokers), declined. The timing of these options purchases, ahead of China's securities regulator announcing that Futu and Up Fintech were operating without mainland licenses on May 22, strongly suggests the traders had advance, non-public information about the impending penalties.
The alleged gains from these insider trades are reportedly larger than those in the notable Galleon insider-trading case, which led to the imprisonment of Raj Rajaratnam. Susquehanna's legal action aims to identify these anonymous traders and potentially freeze their accounts.
This incident highlights that despite the rise of prediction markets like Kalshi and Polymarket, traditional stock markets remain a significant venue for individuals seeking to profit from insider information. The case underscores continuing concerns about market integrity and regulatory oversight in the face of sophisticated trading strategies and information arbitrage.
