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(Bloomberg) — Susquehanna Investment Group is attempting to unmask the identities of individuals it claims made at least $100 million trading on inside information about a Chinese government crackdown on cross-border brokerages last month.
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The Pennsylvania-based market-making firm, which says it was the counterparty on most of the alleged insider trades, sued 100 John Doe defendants in Manhattan federal court on Monday. Susquehanna is seeking to recover more than $70 million it says it lost to what it believes is one of the largest insider-trading schemes in recent memory.
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It’s unusual for a major Wall Street firm to sue as a victim of insider trading, which is normally policed by the Securities and Exchange Commission and federal prosecutors. In suing John Does, Susquehanna is using a tactic sometimes employed by the SEC to seek information it hopes will identify the alleged insider traders.
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According to Susquehanna, many of the trades were made from accounts at Interactive Brokers Group Inc., as well as the platforms of two firms targeted in the Chinese crackdown, Futu Holdings Ltd. and Up Fintech Holdings Ltd.’s Tiger Brokers. Susquehanna is seeking an order freezing certain accounts at those brokerages and authorizing subpoenas of them.
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Susquehanna, which is active in options, stocks, energy, bonds and foreign exchange markets, said in an SEC filing that its equity positions in the first quarter totaled more than $893 billion. The closely held company based in the Philadelphia suburbs has made its co-founder Jeff Yass one of the richest people in the world with a fortune estimated at $92 billion, according to the Bloomberg Billionaires Index.
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Susquehanna’s allegations focus on 200,000 short-dated put option bets placed in the two weeks before the Chinese government’s May 22 announcement that it would punish firms helping mainland Chinese clients illegally invest overseas. The statement was released by eight regulators, including the China Securities Regulatory Commission, the central bank and the public security ministry.
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Almost simultaneously, regulators released a statement singling out Futu, Tiger and the unlisted Long Bridge Securities Ltd. for operating in China without onshore licenses. Futu and Up Fintech’s shares plummeted in response.
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Representatives for Tiger, Futu, Interactive Brokers and the CSRC didn’t immediately respond to requests for comment. Susquehanna declined to comment on the suit.
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Read: Futu, Up Fintech Options Surged Before Crackdown Sparked Slump
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In its suit, Susquehanna alleges several accounts engaged in a pattern of “high risk, high reward trading” designed to take advantage of the projected drops. In one example, a trader purchased the option to sell Futu shares at $102.45 — down from $124.58 — up to a week after the Chinese government’s announcement.
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