#Securities Class Action #Levi Korsinsky #Futu Holdings

Futu Holdings Limited's Legal Troubles

Futu Holdings Limited, publicly traded on NASDAQ under the ticker symbol FUTU, finds itself under the scrutiny of investors and regulators alike. Recently, a securities class action has been initiated against the company, attracting attention from shareholders who may have been impacted by the company’s operational disclosures and subsequent financial fallout. This article delves into the background leading to the alleged infractions, the class action details, and what affected investors can do to address their losses.

Overview of Allegations

The class action lawsuit stems from claims that Futu Holdings misled investors about its regulatory compliance status while publicly celebrating client growth and increasing revenues. According to the lawsuit, the firm allegedly concealed a significant penalty proposed by the China Securities Regulatory Commission (CSRC) amounting to approximately RMB 1.85 billion (around USD 271 million). This penalty was linked to the company's unauthorized cross-border securities business with mainland Chinese investors.

Specifically, investors who purchased Futu shares between May 24, 2023, and May 27, 2026, could potentially recover damages for their losses incurred during this period. The dramatic drop in Futu’s stock price—losing 27.5% in a single day on May 22, 2026—highlights the severity of the situation, as the stock plummeted to $34.10 per share.

Regulatory Background

Futu Holdings, prior to the CSRC’s scrutiny, had been engaged in cross-border securities business without obtaining the necessary licenses. The CSRC's December 2022 announcement specifically highlighted Futu's non-compliance, leading to restrictions on the company's ability to open new accounts for mainland clients. Furthermore, the Futubull app was removed from Chinese app stores in May 2023, showcasing the regulatory pressures mounting against the company. Despite these substantial challenges, Futu’s management continued to release optimistic quarterly updates that painted a picture of strong client growth and financial performance.

The Red Flags

The lawsuit outlines key indicators that point to potential wrongdoing by Futu's executives:

• - The CSRC's December 2022 statement explicitly condemned Futu’s cross-border operations for lacking regulatory approval.
• - The removal of the Futubull app from mainland Chinese app stores served as a clear signal of regulatory enforcement.
• - Official SEC filings admitted that the company did not possess the requisite licenses for providing securities brokerage in mainland China.
• - Though there was growing regulatory scrutiny, Futu continued to report client increases ranging from 15% to 41% year-over-year, without acknowledging the risks involved.
• - Notably, Futu did not make any financial provisions for potential penalties until after receiving the CSRC notification in May 2026.

Internal Knowledge vs. Public Statements

The existing lawsuit suggests a troubling discrepancy between what Futu’s executives knew regarding operational risks and what was disclosed to shareholders. The filings utilized speculative language regarding potential regulatory actions, despite the management's awareness of the company's non-compliant status concerning the CSRC's requirements.

Steps for Affected Investors