A New York federal judge has rejected Susquehanna’s request to freeze nearly $100 million linked to dozens of traders accused of using alleged insider information before China announced a crackdown on cross-border trading platforms.
The court found that Susquehanna Securities and Susquehanna Investment Group had not shown that the defendants were likely to hide, transfer or dissipate the disputed funds before a final judgment could be reached.
The judge also concluded that Susquehanna had not demonstrated a strong enough likelihood of success on its insider trading claims to justify such a significant asset freeze.
Court rejects Susquehanna’s $100 million freeze request
The decision came in a September 14 opinion from the U.S. District Court for the Southern District of New York.
Judge Arun Subramanian ruled that Susquehanna failed to establish the irreparable harm required for a preliminary injunction.
Susquehanna originally filed its lawsuit on June 29 against 100 unnamed defendants, alleging violations of Section 20A of the Securities Exchange Act of 1934 as well as unjust enrichment.
Citadel Securities later joined the case as an intervenor.
The dispute centers on trading activity that took place before a May 22 announcement involving the Chinese government’s crackdown on cross-border trading platforms.
Susquehanna alleged that certain traders used material nonpublic information before the announcement caused sharp price movements in affected securities.
Although the lawsuit initially named 100 defendants, the request for a preliminary injunction was later narrowed to 40.
Susquehanna wanted the court to stop those defendants from transferring, removing, encumbering or otherwise disposing of proceeds held in third-party brokerage accounts.
As an alternative, it also asked the court to attach the assets so they could be used to satisfy a possible future judgment.
Judge finds no clear risk that funds would disappear
One of Susquehanna’s main arguments was that the defendants could move the disputed funds beyond the reach of the court.
The judge rejected that argument.
Subramanian found that Susquehanna had not presented sufficient evidence showing that the defendants intended to conceal, transfer or dissipate their assets before a judgment could be enforced.
The court warned that accepting Susquehanna’s reasoning could effectively make asset freezes routine in insider trading or fraud cases simply because suspicious trading had allegedly occurred.
The judge separately examined domestic defendants, foreign defendants who had appeared in the case, and foreign defendants who had not yet appeared.
For U.S.-based defendants, Susquehanna argued that failure to participate in the litigation increased the risk that assets could disappear.
The court found no evidence that their absence showed an intention to avoid enforcement, noting that some may not even have been formally served.
Susquehanna made a similar argument regarding defendants living overseas.
However, the court ruled that the possibility of difficulty enforcing a future judgment in another country was not enough on its own to prove irreparable harm.
Court finds little evidence of attempts to hide assets
According to the order, Susquehanna did not identify a broader pattern of defendants hiding money, making fraudulent transfers or engaging in other evasive conduct.
Some foreign defendants who appeared in the case also provided evidence showing that they had enough assets to satisfy a possible judgment.
One allegation came closer to raising concern.
Susquehanna said one defendant, identified as John Doe 3, appeared to have removed more than $10 million from an account before a temporary freeze took effect.
However, the judge said the claim lacked sufficient supporting evidence.
The court also noted that transferring money from a trading account does not automatically prove an attempt to avoid a future judgment. The funds could have been reinvested elsewhere or may have belonged to a client, fund or employer.
Trading activity did not prove insider information was used
Susquehanna also struggled to show that it was likely to win the underlying insider trading case.
To succeed under Section 20A, Susquehanna would need to establish that someone with a fiduciary duty or relationship of trust used material nonpublic information to trade or passed that information to other traders.
Susquehanna presented trading charts showing that defendants purchased highly risky, short-dated put options shortly before China’s May 22 announcement.
The company argued that the trades were too unusual to be explained without access to confidential information.
However, some defendants provided alternative explanations for their trading decisions.
Defendants point to public market signals
One defendant, Zhengfei Li, argued that his trading activity was based on publicly visible market signals rather than insider information.
His records showed two equally sized positions, with one expiring before May 22 and the other after the announcement.
Li argued that this pattern was more consistent with repeated speculative trading than with precise knowledge of when a government announcement would occur.
He said unusually heavy put-option activity visible in public markets and investor discussions influenced his decision to buy puts.
Evidence submitted to the court showed that the put-to-call ratio reached approximately 49 to 1 on May 21.
Another defendant provided a similar explanation and submitted messages showing her reaction when the Chinese crackdown became public.
The court said traders could have responded to unusual market activity or public speculation about negative news.
Information available to the public would not qualify as material nonpublic information for an insider trading claim.
Judge says some trades appeared more suspicious than others
The court did not conclude that every defendant’s trading activity looked harmless.
Subramanian noted that some trading records appeared more suspicious than those provided by Li.
However, Susquehanna grouped a large number of defendants together and relied heavily on broader allegations instead of providing detailed evidence regarding each trader.
The judge also pointed to the scale of the original lawsuit.
Susquehanna accused 100 defendants of receiving insider information but later stopped seeking a preliminary injunction against more than half of them.
The company had also not identified the alleged source of the inside information, the fiduciary duty that person supposedly owed, or the personal benefit the source allegedly received for sharing it.
The court found that the large number of apparently unrelated investors could support explanations other than a coordinated insider trading scheme.
China crackdown triggered the dispute
The case stems from a May 22 regulatory action involving Chinese scrutiny of overseas trading services offered to mainland investors.
Chinese securities regulators had targeted cross-border brokerage activity involving firms such as Tiger Brokers, Futu and Longbridge.
The issue involved companies providing mainland Chinese investors access to overseas markets without the required regulatory approval.
China had already tightened restrictions on cryptocurrency and real-world asset tokenization earlier in the year.
Those measures extended restrictions to offshore companies serving mainland users and continued limits on virtual currency-related financial services.
Days after the May 22 announcement, China’s Supreme People’s Court also said judicial authorities would examine rules governing virtual currency disputes and cross-border financial cases.
Susquehanna also loses request to attach assets
After rejecting the preliminary injunction, the court also denied Susquehanna’s alternative request for an asset attachment order.
Under Federal Rule of Civil Procedure 64, courts can seize property to secure a potential future judgment when the relevant state law allows that remedy.
In New York, a party requesting attachment generally must show that it is likely to succeed on the merits of the case.
Susquehanna relied on substantially the same arguments it had used to support its request for a preliminary injunction.
Subramanian found that the company had not demonstrated a sufficient likelihood of success on either its Section 20A insider trading claim or its unjust enrichment claim.
Questions remain over Susquehanna’s alleged losses
The court also raised questions about the financial losses Susquehanna claimed to have suffered.
The market maker acknowledged that it used hedging strategies during the relevant period.
According to the judge, the record did not clearly establish how much of the defendants’ alleged profits, if any, came directly at Susquehanna’s expense.
That uncertainty further weakened the case for immediately restricting assets worth nearly $100 million.
However, the judge emphasized that the ruling does not determine whether Susquehanna has adequately pleaded claims that could ultimately proceed in the lawsuit.
The court only concluded that the much higher legal standard required to freeze the funds had not been met.
Insider trading case remains unresolved
The court denied both Susquehanna’s request for a preliminary injunction and its alternative request for asset attachment.
An earlier temporary order restricting the disputed funds was scheduled to dissolve at 5 p.m. ET on September 16.
The ruling therefore represents a setback for Susquehanna’s attempt to secure the assets while the case continues, but it does not resolve the broader allegations of insider trading.
The underlying lawsuit can still proceed, and the court may later consider whether Susquehanna’s claims are legally sufficient and whether additional evidence supports the allegations.
