TLDR
- Susquehanna’s motion to freeze approximately $100 million in assets was rejected by a federal judge in New York
- The ruling cited insufficient evidence that defendants would conceal or transfer assets prior to a final judgment
- Susquehanna failed to establish that traders possessed material nonpublic information before China’s May 22 announcement
- Both the preliminary injunction motion and asset attachment petition were dismissed
- Multiple defendants presented evidence suggesting their trades relied on publicly observable market data rather than confidential tips
In a significant setback for Susquehanna Securities and Susquehanna Investment Group, a federal judge in New York has rejected their motion to freeze approximately $100 million in assets connected to an alleged insider trading conspiracy involving China’s regulatory crackdown on cross-border trading services.
Judge Arun Subramanian of the U.S. District Court for the Southern District of New York delivered the decision on September 14. The original complaint was filed by Susquehanna on June 29, targeting 100 unidentified defendants with allegations of Securities Exchange Act of 1934 Section 20A violations and unjust enrichment. Citadel Securities subsequently entered the litigation as an intervening party.
At the heart of the case is trading behavior that occurred prior to May 22, when Chinese authorities publicly announced enforcement measures against cross-border trading platforms. Susquehanna alleged that the defendants purchased short-term put options using confidential government information, profiting substantially when the regulatory announcement triggered steep declines in affected securities.
Insufficient Evidence of Asset Dissipation Risk
Susquehanna refined its asset freeze motion to target 40 of the original 100 defendants, requesting the court prevent them from moving or liquidating trading profits maintained at various brokerage firms.
Judge Subramanian determined that Susquehanna failed to present adequate proof demonstrating a genuine risk that defendants would dissipate or conceal their assets ahead of a final ruling. The court further observed that adopting Susquehanna’s position would essentially permit asset freezes in virtually any insider trading litigation without meeting proper evidentiary standards.
The most substantial evidence Susquehanna offered concerned John Doe 3, who allegedly transferred over $10 million from his account prior to any restrictive order. However, the court found this assertion unsupported and emphasized that routine fund transfers from trading accounts do not inherently indicate efforts to evade future judgments.
Evidence Points to Public Information Trading
Susquehanna encountered additional difficulties in demonstrating that defendants probably relied on confidential information rather than publicly accessible market indicators.
Defendant Zhengfei Li presented trading documentation revealing two identically sized option positionsāone expiring before May 22 and another expiring after. He argued his trading strategy derived from abnormal put option volume evident in public market data rather than privileged information. Li pointed to May 21 data showing a put-to-call ratio approaching 49 to 1, which he cited as his rationale for establishing these positions. A separate defendant provided communications expressing shock upon learning of the Chinese regulatory action, which the court interpreted as evidence consistent with lacking advance knowledge.
The judge concluded that defendants may have responded to publicly accessible market signals, which would not constitute material nonpublic information under insider trading statutes.
Additionally, Susquehanna had not identified the purported source of the leak, established any fiduciary relationship that was breached, or demonstrated that any personal benefit was exchanged for the confidential information.
Judge Subramanian also rejected Susquehanna’s backup request for an attachment order, determining the firm had not demonstrated probable success on either legal theory.
A temporary restraining order that had been in place expired at 5 p.m. ET on September 16.
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