Someone apparently knew what was coming. And they bet big on it.

The China Securities Regulatory Commission (CSRC) said it is monitoring developments in a US federal lawsuit where Susquehanna International Group (SIG) alleges that unknown traders made at least $100 million from well-timed options bets placed just before Beijing announced a crackdown on illegal cross-border securities trading. The CSRC and other Chinese regulators penalized Futu Holdings and Up Fintech on May 22 for unlicensed cross-border trading, sending shares of both companies tumbling.

Here’s where it gets interesting. SIG claims that in the roughly two weeks before that announcement, between May 7 and May 21, traders scooped up approximately 200,000 short-dated put options on those very same companies. The initial investment was around $12 million. The payout exceeded $100 million, a return north of 900%.

The mechanics of the alleged scheme

Put options are essentially bets that a stock’s price will fall. Buying short-dated puts, ones that expire quickly, is a particularly aggressive wager because time decay works against you. Unless, of course, you already know the stock is about to crater.

SIG, one of the largest market-making firms in the world, was on the other side of these trades. The firm served as the counterparty, meaning it sold the puts that the alleged insiders bought. SIG reported losses exceeding $70 million as a result and filed its federal court complaint on June 29.

The trades were primarily executed through US trading platforms, including Interactive Brokers. SIG’s legal action has already secured court-ordered freezes on accounts believed to be connected to the scheme, and the firm is seeking subpoenas to identify the traders involved.

US regulators pile on

SIG isn’t fighting this alone. By early July, both the US Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) had reportedly launched their own investigations into the allegations. That dual-agency attention is significant because it signals that federal prosecutors see potential criminal liability here, not just civil violations.

The SEC typically handles market manipulation and insider trading on the civil side, pursuing disgorgement of profits and penalties. The DOJ’s involvement raises the stakes considerably, opening the door to criminal charges that could carry prison time for anyone identified.

Why the crypto market should be paying attention

No cryptocurrencies, tokens, or digital assets are involved in this case. It is entirely about traditional equity options trading on US-listed Chinese stocks. But the implications ripple well beyond traditional finance.

First, the case spotlights the ongoing regulatory tension between Beijing and cross-border financial services. Futu Holdings and Up Fintech operate brokerage platforms that allow Chinese investors to access overseas markets, a model that has drawn increasing scrutiny from Chinese authorities.

Second, the DOJ has already brought criminal insider trading charges in crypto, most notably against a former Coinbase employee in 2022. A high-profile traditional finance case reinforcing the government’s willingness to pursue cross-border manipulation schemes only strengthens that enforcement posture.

Third, SIG itself is a significant player in digital asset markets. Any financial or reputational impact on SIG from this lawsuit could have downstream effects on liquidity provision across multiple asset classes, including crypto.

The frozen accounts and pending subpoenas suggest that at least some of the traders may be identified in the coming months. If those individuals turn out to have connections to Chinese regulatory bodies or the companies being penalized, the case could become a landmark in cross-border enforcement cooperation.