Susquehanna International Group (SIG), a Pennsylvania-based market-making firm, has filed a lawsuit against 100 unnamed individuals, alleging they engaged in insider trading that caused SIG to lose over $70 million. The lawsuit, filed in Manhattan federal court, claims these defendants made over $100 million in profits by placing options bets on Chinese securities firms, specifically Futu Holdings Ltd. and Up Fintech Holdings Ltd., just before a regulatory crackdown by Chinese authorities on May 22.
The alleged insider trading involved buying short-term put options on these Chinese online brokerages between May 7 and May 21, spending approximately $12 million to generate significant profits as the shares of these companies plummeted after the Chinese government's announcement. Susquehanna was the counterparty on most of these trades, arguing that the "high risk, high reward" nature of these options bets could only be explained by access to inside information, possibly from Chinese regulatory staff or employees of Futu or Up Fintech.
The U.S. Securities and Exchange Commission (SEC) is now investigating Susquehanna's claims. A federal judge has already granted Susquehanna's request to freeze accounts at Interactive Brokers Group Inc., Futu, and Up Fintech's Tiger Brokers, which were allegedly used for these trades. Susquehanna also received permission to subpoena these firms to identify the account holders. Both Futu and Up Fintech were targeted by the Chinese government for operating unlicensed trading services for mainland residents, leading to significant drops in their share prices and regulatory penalties, such as a 1.85 billion yuan ($272 million) fine for Futu.
