Key facts
- The SFC has frozen over HK$4.6 billion in assets across 35 brokerages.
- The freeze is the largest of its kind in the SFC's history.
- Sichuan Baicha Baidao Industrial shares were suspended from trading on Tuesday.
- The SFC suspects IPO rigging schemes involved undisclosed agreements to divert IPO proceeds.
- Funds were allegedly channeled back to major IPO placees to manufacture phantom demand.
- The SFC stated market integrity is the bedrock of fair capital markets.
Hong Kong's Securities and Futures Commission (SFC) has taken significant action against suspected IPO-rigging syndicates, freezing over HK$4.6 billion in assets and ordering a trading halt for bubble tea chain Sichuan Baicha Baidao Industrial Co., Ltd. The SFC's move, described as a record enforcement, aims to bolster market integrity amid concerns of manipulated initial public offerings.
The SFC directed The Stock Exchange of Hong Kong to suspend dealings in Baicha Baidao shares from 9:00 a.m. on Tuesday, citing "serious concerns" that its listing may have been manipulated to create an artificial impression of market demand. The regulator stated the suspension is necessary to maintain an orderly and fair market and protect investors.
In parallel, the SFC escalated action against two suspected syndicates. For the first group, restriction notices were served on six brokers, freezing up to HK$4.38 billion in client assets linked to an individual named Sun Ran and eight related entities. This network is suspected of involvement in fraudulent activity tied to the IPOs of both Baicha Baidao and Cloudbreak Pharma.
A second set of notices targeted assets of up to HK$285 million held in accounts linked to Liu Haoran and two firms, across 29 brokers, in connection with suspected manipulation around the listing of Tianju Dihe (Suzhou) Technology. The SFC alleges that these syndicates entered into undisclosed agreements with listing candidates to divert IPO proceeds into financial products, which were then secretly channeled back to major placees or connected parties to manufacture phantom demand.
SFC Chief Executive Officer Julia Leung emphasized a "zero-tolerance policy toward any form of IPO rigging, price manipulation, or the creation of a false market," while Executive Director of Enforcement Michael Duignan stated the intervention has "significantly disrupted" the suspected syndicates' activities. The SFC stressed that the brokerages receiving notices are not targets of the investigation and their other operations remain unaffected. Preserved assets may potentially be used for restitution to compensate affected investors.