SEC probes $100 million options windfall tied to Futu, Tiger

A roughly $100 million options gain is now under U.S. regulatory scrutiny after China’s crackdown on cross-border brokerages. The U.S. Securities and Exchange Commission is examining allegations, reported by Bloomberg on Wednesday, that unknown traders made the windfall before Beijing acted on May 22. Susquehanna International Group said it lost more than $70 million on the other side.

Susquehanna says the traders put about $12 million into the positions and cleared at least $100 million after China targeted Futu Holdings Ltd. (FUTU) and UP Fintech Holding Ltd. (TIGR), Tiger Brokers’ parent. Bloomberg Markets reported on June 29 that a judge froze accounts at Interactive Brokers, Futu and Up Fintech after the trading firm asked the court to identify the traders. That is the hinge of the U.S. case. If the timing reflected leaked regulatory information, a modest options outlay became a large payoff through U.S. market plumbing.

Shares did not price in an imminent enforcement case. Futu rose 6.07 per cent to $99.92 in early U.S. trading on Wednesday, while Tiger gained 5.24 per cent to $4.62, according to yfinance data in the research bundle. The move came even though Bloomberg said China had fined Futu 1.85 billion yuan, or about $272 million, in the May 22 action against unlicensed cross-border brokerage activity. Investors appear to be separating the China crackdown from any eventual SEC case.

Two tracks now run in parallel. Beijing is tightening control over how mainland investors reach offshore markets. Washington is asking whether anyone turned that policy decision into an illegal trading edge. The risk has moved beyond Chinese regulation and into U.S. enforcement uncertainty over who traded, what they knew and when they knew it.

Why the trade stands out

Options cases often come down to timing, size and the trail of accounts. Susquehanna’s description of this one is unusually direct. In the account cited by Bloomberg, the firm said the buyers put on “high risk, high reward” positions shortly before the crackdown and that the pattern could only be plausibly explained by insider trading.

“high risk, high reward” options bets could only be plausibly explained as insider trading

Susquehanna, as cited by Bloomberg

The May action was not an isolated penalty. In a May 22 report, Bloomberg said Chinese securities regulators planned to penalize Futu, Tiger Brokers and Longbridge Securities for operating on the mainland without licences. Weeks later, the Financial Times reported that the crackdown had left mainland investors worried about losing access to offshore deals, including a possible SpaceX initial public offering.

CNBC described the same shift as a tightening of retail access to U.S. equities. Theodore Shou of Skybound Capital told the network that “It should not have any material impact on foreign investors at all.” That reading points to domestic capital leakage as Beijing’s target. The SEC inquiry adds a separate problem for the brokers, because U.S. enforcement risk cannot be settled only through China compliance.

Tiger said it would “strictly comply with regulatory requirements and actively co-operate with the relevant process”, according to the Financial Times. Bloomberg said the scope and stage of the SEC review were not immediately clear, and the regulator declined to comment. U.S. probes can end without charges. Until account holders are identified, though, the stocks are likely to trade on legal filings and headlines rather than a settled enforcement record.

For now, the clearest figures are Susquehanna’s: more than $70 million lost, roughly $12 million spent by the traders and at least $100 million in profit, all tied to a crackdown that Bloomberg said carried a 1.85 billion yuan penalty for Futu alone. If regulators can show the trades were informed by a leak, the episode will look like a classic insider-trading case amplified by options leverage. If not, it will still show how offshore access points into Chinese markets can create fragile chains of information, custody and enforcement far beyond the original policy decision.