Citadel Securities Asks to Join Susquehanna Insider-Trading Suit

Citadel Securities LLC said it was the victim of the same alleged insider-trading scheme that rival Susquehanna International Group claims made more than $100 million on options bets placed ahead of a Chinese regulatory crackdown.

Ken Griffin’s market-making firm late last week asked for court permission to join Susquehanna’s June 29 lawsuit, saying it lost about $28 million as the “victim of a brazen insider trader scheme.”

Susquehanna sued 100 John Doe defendants in Manhattan federal court, acknowledging it did not know who made the trades. But it said only the possession of inside information could plausibly explain the “high risk, high reward” bets on U.S. exchange-traded options in securities firms like Futu Holdings Ltd. and Up Fintech Holding Ltd. that were affected by the Chinese government in a May 22 announcement.

The Justice Department and U.S. Securities and Exchange Commission are looking into the claims of insider trading, Bloomberg previously reported.

Pennsylvania-based Susquehanna said it lost more than $70 million as the counterparty on many of those trades. A judge last week granted Susquehanna’s request to freeze accounts at Futu, Up subsidiary TradeUp Securities and Interactive Brokers Group Inc. that it believes were used to make the trades and allowed Jeff Yass’ market-making firm to subpoena the brokerages for the account-holders’ identities.

Interactive Brokers has said that it has been cooperating with Susquehanna, including freezing accounts, since the trading activity was identified.

Citadel Securities said in its July 2 court filing that it was seeking to join the suit partly because any recovery by Susquehanna, including from the frozen funds, could reduce the amount available to compensate its own losses.

A representative for Citadel Securities declined to comment beyond the filing. Susquehanna didn’t immediately respond to a request for comment on Citadel Securities’ request.

While Susquehanna estimated the trades yielded more than $100 million, Citadel Securities alleged in its motion the number was closer to $137 million. In its suit, Susquehanna said it was one of the largest insider-trading schemes in recent history.

“By way of comparison, Raj Rajaratnam’s infamous insider trading scheme at Galleon Management yielded only approximately $53 million in profits,” Susquehanna said, referring to the hedge fund manager convicted in 2011.

Top photo: Citadel signage on the floor of the New York Stock Exchange. Photographer: Michael Nagle/Bloomberg.