The legal action follows a 27.5% single-day drop in Futu’s share price, which saw the stock slide by $34.10. This market reaction occurred after the China Securities Regulatory Commission (CSRC) proposed penalties totaling approximately RMB 1.85 billion—roughly $271 million—for alleged unlicensed brokerage activities. The lawsuit, filed in the U.S. District Court for the Southern District of New York, covers shareholders who purchased securities between May 24, 2023, and May 27, 2026.

At the heart of the complaint is the allegation that Futu’s reported growth in paying clients—rising from 1.5 million to over 2.8 million—relied on operations that lacked necessary regulatory approvals. While the company stated in SEC filings that disciplinary risks were hypothetical, the lawsuit contends that management was aware of its non-compliant status. Proposed penalties include the confiscation of RMB 470 million in gains and an additional RMB 1.38 billion in fines, alongside a personal fine for the firm’s founder. Lead counsel Joseph E. Levi argues that investors were denied critical information regarding the stability of the company’s revenue streams during the specified period.