Hong Kong’s Securities and Futures Commission on 13 October moved against two groups it suspects of rigging initial public offerings, freezing up to HK$4.38 billion held at six brokers for one group, “the largest amount of its kind in the SFC’s history”, and a further HK$285 million at 29 brokers for the other. It also directed the stock exchange to suspend dealings in Sichuan Baicha Baidao Industrial (2555) from 9:00am that day. The SFC’s description of the scheme points at a weakness in how IPO demand is evidenced in Hong Kong, and the brokers served with notices include CICC, CMB International, Haitong International and Futu.
The suspected scheme recycled IPO proceeds back to placees
According to the SFC, portions of IPO proceeds “may have been transferred out of listed companies for purported investments in financial products” under undisclosed agreements between the companies and the syndicates. Those agreements may have let IPO proceeds be “secretly channelled back to major IPO placees or their connected parties”.
If that is what happened, the demand that supported the offering was partly financed by the issuer’s own new money. Placees subscribe, the company raises cash, part of the cash leaves the company as an “investment”, and it returns to the people who subscribed. The book looks fully covered and the shareholder base looks wide, yet the economic risk sits with the issuer and its public shareholders.
Three IPOs are linked to the two groups
The first group is linked to the IPOs of Cloudbreak Pharma, listed on the Main Board on 3 July 2025 and suspended at the SFC’s direction on 10 September 2026, and Baicha, listed on 23 April 2024. The restriction notices cover client accounts in the names of Sun Ran and eight companies, six incorporated in the British Virgin Islands, one in Seychelles and one in Samoa. The SFC notes that Sun Ran is a licensed representative of Harvest Global Capital Investments, which is itself one of the six brokers served.
The second group is linked to the IPO of Tianju Dihe (Suzhou) Technology, listed on 28 June 2024 and suspended since 1 April 2025. Those notices cover accounts held for Liu Haoran and two Hong Kong companies.
The SFC used section 8(1) of the Securities and Futures (Stock Market Listing) Rules to suspend Baicha, citing serious concerns that its IPO “may have been rigged to create an artificial impression of demand”, and sections 204 and 205 of the Securities and Futures Ordinance for the restriction notices.
We maintain a zero-tolerance policy toward any form of IPO rigging, price manipulation, or the creation of a false market.
Julia Leung, Chief Executive Officer, SFC, 13 October 2026
The freeze is aimed at restitution
The restriction notices bar the brokers, without the SFC’s written consent, from dealing with the assets or acting on instructions from the named entities, and require them to report any instructions immediately. The SFC says the brokers are not subjects of its investigation and that the notices do not affect their other clients. It adds that the parties involved “may be ordered to compensate affected investors through a restitution process in the future”.
The size of the freeze tells investors something about the SFC’s intentions. Preserving assets on that scale before any charge is laid keeps open the option of returning money to investors who bought shares in the affected IPOs, which is harder to do once assets have left Hong Kong.
Leung also described the SFC’s actions as “highly focused and proportionate in practice”. That line is addressed to the IPO pipeline. The SFC wants to show it can pursue suspected rigging in individual deals without casting doubt on Hong Kong listings in general.
Sponsors and placing agents face the next questions
Enforcement director Michael Duignan said the actions “have significantly disrupted two suspected syndicates”. The case does not stop with the syndicates. The SFC’s framing puts the spotlight on how IPO sponsors and placing agents verify that placees are independent and that use-of-proceeds disclosures are honoured after listing. A scheme in which proceeds leave a newly listed company within months to fund a “financial product” investment should have been visible in post-listing announcements, and the SFC will want to know who looked.
For investors, two Main Board stocks are now suspended at the SFC’s direction within five weeks, and a third has been suspended since April 2025. Holders face an indefinite wait while investigations continue, and the SFC says it will not comment further while they do.
What to watch
- Any SFC application to the court for orders over the frozen assets, including restitution orders.
- Conditions the SFC sets for any resumption of trading in Baicha or Cloudbreak shares.
- Follow-up guidance or disciplinary action involving IPO sponsors and placing agents.
Primary sources
- SFC, SFC takes action against suspected IPO-rigging syndicates and suspends dealings in Baicha shares, 13 October 2026
Photo (cropped): Aaron Zhu, CC BY-SA 3.0 via Wikimedia Commons
