Hong Kong’s Securities and Futures Commission (SFC) has frozen assets totaling HK$4.6 billion amid investigations into three suspected initial public offering (IPO) fraud schemes, according to a statement released on Wednesday. The regulator has also suspended 65 listing applications so far this year, citing concerns over the quality of sponsors’ work, in an effort to uphold market integrity.
The SFC’s enforcement actions target two suspected syndicates accused of collaborating with listed companies to divert proceeds from IPOs through purported “financial product investments,” effectively siphoning funds away from the companies. The cases involve three firms: Chinese bubble-tea manufacturer Sichuan Baicha Baidao Industrial—also known as Chabaidao—along with biotechnology firm Cloudbreak and data analytics provider Tianju Dihe Technology.
Trading in Chabaidao shares was halted before the market opened on Wednesday under a regulatory rule that allows suspension when a company has allegedly issued false or misleading information or when intervention is required to ensure fair and orderly trading. Cloudbreak and Tianju Dihe were suspended on September 10 this year and April 1 last year, respectively, under the same provision.
Michael Duignan, SFC executive director of enforcement, said the regulator’s recent actions have substantially disrupted the activities of the syndicates believed to be involved in IPO rigging. The first syndicate, linked to the Chabaidao and Cloudbreak schemes, prompted the SFC to issue restriction notices against six brokers and freeze up to HK$4.38 billion held in nine bank accounts. These accounts are registered to Sun Ran—alleged to be the mastermind of the syndicate and a licensed representative of Harvest Global Capital Investments—and eight companies based in offshore jurisdictions including the British Virgin Islands, Seychelles, and Samoa. This is reportedly the largest freeze of its kind in the SFC’s history.
The second group, connected with the Tianju Dihe listing, faced restrictions on HK$285 million held across accounts belonging to investor Liu Haoran and two Hong Kong-registered companies, involving 29 brokerage firms.
While the SFC has imposed restrictions on brokers’ accounts, it clarified that the brokers themselves are not targets of the investigation. The commission indicated that individuals and entities involved could be required to compensate investors affected by the alleged fraud through a restitution process in the future.
The suspension of numerous listing applications this year underscores the SFC’s intensified scrutiny on market participants to enhance the quality and transparency of Hong Kong’s capital markets. Analysts view these measures as part of a broader effort to maintain investor confidence amid growing concerns about market misconduct.