A New York federal judge has denied Susquehanna's request to freeze nearly $100 million tied to dozens of traders accused of profiting from alleged insider information before China announced a crackdown on cross-border trading platforms.
The ruling was issued September 14 by Judge Arun Subramanian of the U.S. District Court for the Southern District of New York. Susquehanna Securities and Susquehanna Investment Group filed the lawsuit on June 29 against 100 unnamed defendants, alleging violations of Section 20A of the Securities Exchange Act of 1934 and unjust enrichment. Citadel Securities later joined the case as an intervenor.
The dispute centers on trading activity before May 22, when China announced scrutiny of overseas trading services offered to mainland investors. Susquehanna claimed defendants bought short-dated put options using material nonpublic information, which paid off when the announcement caused a sharp drop in related securities. The market maker initially targeted 100 defendants but narrowed its preliminary injunction request to 40.
The court found no imminent risk that funds would be dissipated. Judge Subramanian ruled that Susquehanna had not produced enough evidence to show defendants were likely to hide or move assets before a judgment could be enforced. The judge noted that accepting Susquehanna's argument would effectively allow asset freezes as a matter of course in many insider trading or fraud cases.
The court also found Susquehanna had not demonstrated a likelihood of success on the merits. One defendant, Zhengfei Li, submitted trading records showing two equally sized positions, with half expiring before May 22 and the remainder afterward. Li said unusually heavy put option activity visible in public market data, including a put-to-call ratio of roughly 49 to 1 on May 21, led him to enter the trades. The court said defendants could have acted on publicly available signals, which would not qualify as nonpublic information.
Susquehanna had not identified the alleged tipper, the fiduciary duty owed, or any personal benefit received for providing information. The judge denied both the preliminary injunction and an alternative request for an asset attachment order. An earlier order restricting the funds was set to dissolve at 5 p.m. ET on September 16.
The underlying May 22 regulatory action involved Chinese scrutiny of cross-border brokerage activity involving firms including Tiger Brokers, Futu and Longbridge. China had already tightened restrictions on crypto and real-world asset tokenization in February, and days after the May 22 development, China's Supreme People's Court said judicial authorities would study rules for virtual currency disputes and cross-border financial activity.
