SEC investigates Susquehanna’s claims of $100M insider trading profit tied to China crackdown

Someone knew what was coming. In the weeks before China dropped the hammer on offshore brokerage firms in late May, unknown traders quietly loaded up on roughly 200,000 short-dated put options on Futu Holdings and Tiger Brokers. When the crackdown hit on May 22, those bets paid off spectacularly, turning a $12 million stake into profits exceeding $100 million.

That’s a return north of 900%. And Susquehanna International Group, which was on the other side of those trades, is not letting it slide.

A market maker fights back

Susquehanna and its affiliate 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 two Chinese fintech companies, Futu Holdings (FUTU) and Up Fintech Holdings, better known as Tiger Brokers (TIGR).

When those put options printed massive gains for the mystery traders, Susquehanna ate the corresponding losses, totaling more than $70 million.

A temporary restraining order was granted just one day after filing, on June 30. 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, no trader identities have been publicly disclosed.

What triggered the trades

The catalyst was China’s regulatory announcement on May 22, which penalized 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.

Susquehanna’s complaint centers on the argument that the trading pattern in the weeks preceding the crackdown was abnormal enough to suggest insider knowledge. Short-dated options are already speculative instruments. Loading up on them in size, targeting two specific Chinese brokerage stocks, right before an unannounced regulatory action, goes beyond what most would chalk up to coincidence.

Why this lawsuit is unusual

This is a private civil lawsuit, not an SEC-led investigation. Susquehanna is essentially doing the detective work itself: filing John Doe complaints, seeking court orders to unfreeze discovery mechanisms, and trying to unmask anonymous traders through subpoenas directed at brokerages.

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