Susquehanna sues unidentified traders over $100M insider trading profit tied to China crackdown
In brief
- Unknown traders converted $12 million into over $100 million in put option profits before China's May 22 regulatory crackdown on offshore brokers.
- Susquehanna International, the counterparty to the trades, incurred losses exceeding $70 million and filed a federal lawsuit on June 29.
- A temporary restraining order granted June 30 allows Susquehanna to freeze brokerage accounts and issue subpoenas to identify the traders.
The Trade and the Timing
Unknown traders loaded up on roughly 200,000 short-dated put options on Futu Holdings and Tiger Brokers in the weeks preceding the crackdown. The bet paid off spectacularly. The traders achieved a return exceeding 900% on their initial investment.
China announced regulatory penalties on May 22 against firms including Futu and Tiger Brokers for allegedly enabling mainland Chinese clients to access overseas securities markets without proper authorization. Shares of both companies cratered on the news. The timing wasn't coincidence, Susquehanna argues. The trading pattern in the weeks preceding the crackdown was abnormal enough to suggest insider knowledge.
The Lawsuit and the Freeze
Susquehanna International Group and Susquehanna Securities filed a federal lawsuit in Manhattan on June 29 targeting up to 100 unidentified defendants. The firm alleges these traders used material non-public information to place precisely timed bets against the two Chinese financial firms.
A temporary restraining order was granted the very next day. That order allows Susquehanna to freeze brokerage accounts connected to the trades and issue subpoenas to identify who was behind them. The majority of the questionable trades were reportedly routed through Interactive Brokers and the affected firms themselves.
As of early July, the traders remained anonymous. No trader identities have been publicly disclosed.
A Private Fight, Not an SEC Case
It's important to note: this is a private civil lawsuit, not an SEC-led investigation. Susquehanna is pursuing its own damages through the courts, armed with subpoena power and account freezes. The case hinges on whether the trading pattern—the size, the timing, the precise targeting of these two stocks—amounts to evidence of insider knowledge. The identity of the traders will determine whether regulators open their own inquiries or whether this remains a bilateral dispute between Susquehanna and unknown counterparties.
