SEC Investigates Insider Trading Allegations Linked to Crackdown on Chinese Brokerages

According to media reports, Susquehanna International Group has accused unidentified insider traders of making about 100 million dollars through options trading ahead of China’s regulatory crackdown on cross border brokerages. The US Securities and Exchange Commission (SEC) is currently investigating the matter. Bloomberg reported on Wednesday evening, citing people familiar with the matter, that Susquehanna filed a lawsuit on Monday, and the SEC is now reviewing the related transactions mentioned in the complaint. In a lawsuit against 100 “John Doe” defendants, Susquehanna said it lost more than 70 million dollars as the counterparty to most of the suspected insider trades. The firm stated that it does not know the identity of the traders, but believes that the “high risk, high reward” options activity can only be reasonably explained by insider trading. On Monday, a federal judge approved Susquehanna’s request to freeze accounts at Interactive Brokers (IBKR), Futu Holdings (FUTU), and UP Fintech (TIGR), which were allegedly used by the defendants to conduct the trades. Tiger Brokers (TIGR) and Futu (FUTU) have previously been under investigation by Chinese regulators for allegedly providing unlicensed trading services to mainland Chinese residents. A spokesperson for Interactive Brokers said the company is cooperating with Susquehanna and will work with regulators. IBKR shares rose 0.6 percent in early Thursday trading, while FUTU and TIGR each fell 0.7 percent.