- Susquehanna has accused Futu and Tiger Brokers of enabling insider trading.
- The US SEC has launched an investigation into Susquehanna’s latest allegations.
- Insider traders allegedly made a $100 million profit betting on Futu and Tiger Brokers
According to reports, US regulators have opened a probe into an allegation by Susquehanna International Group. The group accused unknown traders of manipulating options bets ahead of a recent crackdown by Chinese regulators on cross-border brokerages Futu and Tiger Brokers, making $100 million in the process.
Susquehanna Claims a $70 million Loss
On June 29, Susquehanna announced that it had filed a lawsuit in a federal court in Manhattan on the matter. Meanwhile, the US Securities and Exchange Commission (SEC) has launched investigations, examining the trades described in Susquehanna’s complaint.
The market-making firm claimed that it lost over $70 million as a counterparty on most of the alleged insider trades. It further stated that the incident involved traders buying US exchange-traded options in Chinese securities firms that were subsequently targeted in a crackdown in May.
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The Motive Behind the SEC’s Probe
Despite the ongoing probe, there is no definitive extent of how far the SEC may want to go with its findings. Hence, the regulator’s review can end with documentation rather than any form of enforcement.
In the meantime, Susquehanna reportedly sued 100 John Doe defendants. The firm acknowledged not knowing who made the trades, but noted that “high risk, high reward” options bets can only happen with insider involvement.
Initial Court Actions
Following Susquehanna’s filing, the court ordered the freezing of accounts at Interactive Brokers Group and the platforms of Up Fintech Holding, the parent company of Futu and Tiger Brokers. Allegedly, those are the platforms the defendants used to execute the trades under review. The court also permitted Susquehanna to subpoena the firms for the account-holders’ identities.
Notably, the Chinese government targeted Futu and Tiger Brokers in May, alleging that the firms operated unlicensed trading services for mainland residents. The companies’ shares fell sharply on May 22, with Futu being handed a 1.85 billion yuan regulatory penalty. The firm’s founder, Leaf Li, subsequently saw his fortune drop by $1.7 billion in a single day.
An Interactive Brokers spokesperson acknowledged Susquehanna’s filing, confirming cooperation with the market maker and their preparedness to support relevant regulators when called upon. Susquehanna alleged that Chinese regulatory staff or workers at Futu tipped off the insider traders, enabling them to buy options cheaply. The traders spent around $12 million to generate at least $100 million in profit.
Related : South Korean Regulator Escalates Two Market Manipulation Cases for Investigation
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