Caixin reported on July 14 that an investor has filed a securities class action lawsuit against Futu Holdings (NASDAQ: FUTU) in the U.S. District Court for the Southern District of New York. The lawsuit alleges violations of the U.S. Securities Exchange Act of 1934 provisions on securities fraud and liability for controlling persons. Defendants include Futu Holdings, its founder, Chairman, and CEO Hua Li (Leaf Li), and its CFO Yu Chen. The lawsuit claims the company’s stock fell by about 32%.
Class period: May 24, 2023 to May 27, 2026
According to a KSF law firm press release, the class action covers investors who purchased or otherwise acquired Futu Holdings securities during the period from May 24, 2023, to May 27, 2026 (inclusive of both the start and end dates). If investors want to serve as lead plaintiff, they must apply to the court by August 25, 2026.
The case is currently being heard in the U.S. District Court for the Southern District of New York under case number 26-cv-05453. KSF is a law firm led by Charles C. Foti II, former Louisiana Attorney General, as a partner. The firm was ranked among the top ten securities litigation law firms in the U.S. last year based on the total compensation it obtained.
Specific allegations in the lawsuit: continued cross-border business without obtaining China’s license; financial results overstated
According to a KSF law firm press release, the alleged false and misleading statements and omissions include:
Failure to comply with China’s regulatory requirements: the company did not obtain the necessary licenses or approvals and continued to carry out cross-border securities business, public fund sales, and futures business in mainland China
Facing a significant risk of major penalties: due to the above conduct, the company is highly likely to face penalties including the pursuit of illegal proceeds
Financial performance overstated: the above issues led to the company’s financial performance being overstated
Misleading external disclosures: the defendants’ positive statements about the company’s business, operations, and outlook were materially misleading and/or lacked a reasonable basis
Hua Li and Yu Chen are named as individual defendants, mainly because the two persons had involvement in reviewing, approving, or exercising control over documents, earnings releases, and other external disclosures submitted by Futu to the U.S. SEC.
Background: ¥1.85 billion in China penalties; SEC investigation into options insider trading
According to reports, the class action has several background events:
· Chinese regulators imposed an approximately ¥1.85 billion penalty on Futu for providing unlicensed cross-border securities trading services to investors in mainland China. Futu’s share price plummeted, and founder Hua Li saw about $1.7 billion of his net worth evaporate in a single day;
· The U.S. SEC is investigating allegations against market maker Susquehanna—relating to large purchases of U.S. stock options tied to Up Fintech (the parent company of Tiger Securities) before the Chinese regulators announced a crackdown on May 22, 2026;
· A U.S. court, upon application, froze assets in suspected related accounts on the Futu and Up Fintech platforms and allowed subpoenas to seek disclosure of the account holders’ identities.
FAQ
What are the core allegations in the Futu Holdings class action?
According to a KSF law firm press release, the lawsuit alleges that Futu Holdings continued to conduct cross-border securities, public fund sales, and futures business in mainland China without obtaining China’s necessary licenses, which led to overstated financial performance and materially misleading external disclosures, violating the securities fraud and controlling-person liability provisions of the U.S. Securities Exchange Act of 1934.
When do interested investors need to apply to participate in the class action?
According to a KSF law firm press release, the class action covers investors who purchased Futu securities during the period from May 24, 2023, to May 27, 2026. If investors want to serve as lead plaintiff, they must apply to the court by August 25, 2026.
Why is Futu Holdings’ founder and CEO Hua Li listed as an individual defendant?
According to the complaint documents, Hua Li and CFO Yu Chen are listed as individual defendants mainly because their review, approval, or control over documents, earnings announcements, and other external disclosures submitted by Futu to the U.S. SEC meets the elements required for controlling-person liability.
