Federal Judge Denies Susquehanna's Request to Freeze Accounts in Insider Trading Case

A federal judge in the Southern District of New York has denied Susquehanna International Group's request to convert a temporary restraining order into a preliminary injunction against unidentified traders accused of insider trading. The judge's ruling, issued on August 26, allows the proceeds from the alleged scheme to potentially be moved, complicating Susquehanna's efforts to recover approximately $70 million in losses related to the trades.

The case centers around a significant trading activity that occurred prior to a May 22 announcement by the Chinese government regarding a crackdown on unlicensed brokerages. In the days leading up to this announcement, unknown traders purchased over 200,000 short-dated put options on US-listed Chinese fintech companies FUTU Holdings and UP Fintech, turning an initial investment of $12 million into profits exceeding $100 million. Susquehanna alleges that these traders had access to non-public information about the impending regulatory action.

Judge Arun Subramanian ruled that it was inappropriate to issue a more permanent injunction against defendants identified only by pseudonyms. While the lawsuit remains active, the absence of a freeze on the accounts raises concerns that the alleged profits could be transferred to jurisdictions that make recovery more difficult. Susquehanna's legal team will now need to identify the traders behind the pseudonyms through discovery and potentially international cooperation.

The ruling underscores challenges in securities enforcement, particularly in identifying traders who operate through multiple brokerage accounts. The combined losses claimed by Susquehanna and Citadel Securities, which also reported losses of approximately $28 million in connection with the same trades, highlight the significant impact of such insider trading allegations on market makers and the broader equity market structure.

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Source: KLEA News