What Individual Investors Don't See Until It's Too Late

Every insider-trading scandal tells the same story twice. The first telling is legal: who knew what, when, and whether they were allowed to trade on it. The second telling is structural, and it matters more for ordinary investors: someone in the network always sees the event before the market does — and whoever sees it last pays for it.

**The case.** On May 22, Chinese regulators cracked down on cross-border securities firms. Shares of Futu Holdings and Tiger Brokers fell hard. But in the weeks before the announcement, unidentified traders had quietly accumulated roughly 200,000 short-dated put options on exactly those two names — turning a $12 million position into more than $100 million in profit. Susquehanna International Group, the market maker that sold many of those puts, says it lost over $70 million. It filed suit in Manhattan federal court on June 29, won a freeze order and the right to subpoena brokers for the account holders' identities on June 30, and by July 2 both the SEC and the Department of Justice were reported to be examining the trades.

**The concept.** This is information asymmetry in its purest commercial form. The regulatory decision existed inside a network — officials, institutions, intermediaries — before it existed in public. Somewhere along that network, knowledge leaked into positioning. RaymondsIndex approaches this structurally: our MAI (Momentum Alignment Index) flags divergence between what a company's fundamentals are doing and what its capital flows are doing, while CEI (Capital Efficiency Index) tracks whether capital is genuinely working or quietly repositioning. When alignment breaks, someone usually knows something.

**Korea parallel.** Korea offers the mirror image the very same week. On July 1, strengthened sentencing guidelines for securities and financial crimes took effect — recommended prison terms for unfair trading now reach up to 19 years in the aggravated range for schemes above ₩30 billion. The timing is pointed: prosecutors are weighing a case in which a securities-firm executive who managed tender offers allegedly used non-public deal information across 15 listed companies between May 2023 and September 2025, trading through borrowed-name accounts, with eight people referred for prosecution and secondary recipients fined a combined ₩3.7 billion. Across the 3,109 companies in our reference universe, this is the recurring pattern: the informed act during the quiet period, and the uninformed provide the liquidity. The signals that precede these events are measurable, with effect sizes of d>0.8 — at 85.9% accuracy — before the public disclosure ever lands.

**Academic frame.** None of this is new to economics. Akerlof's "The Market for Lemons" (1970, *Quarterly Journal of Economics*) showed that when one side of a trade knows more, the less-informed side systematically overpays or exits the market. Kyle's "Continuous Auctions and Insider Trading" (1985, *Econometrica*) formalized exactly what the Futu-Tiger episode illustrates: informed traders extract profit gradually and quietly, and uninformed traders — including the market makers pricing for them — bear the loss. The theory is forty years old. The options were bought this spring.

**The takeaway.** Individual investors cannot out-know a network. But they can watch what the network does. Unusual positioning ahead of announcements, capital flows that diverge from fundamentals, insiders acting while narratives stay calm — these are observable long before the press release. Enforcement, whether an SEC probe in New York or a 19-year sentencing ceiling in Seoul, punishes the last scandal. Leading indicators are how you avoid being the liquidity in the next one. By the time the financial statements show it, the people who needed to know already knew — the practical question is whether you were watching the relationships or waiting for the filing.

#RaymondsRisk #RelationalRisk #CorporateGovernance #InsiderTrading #InformationAsymmetry #RetailInvestors

[SOURCES]
- Insider Trading Claims Cost Susquehanna Over $70 Million, Lawsuit Says (Bloomberg, 2026-06-29) — https://www.bloomberg.com/news/articles/2026-06-29/susquehanna-says-it-lost-millions-to-mystery-insider-traders
- Susquehanna Wins Court Order to Subpoena Brokers in $100 Million Trading Case (Bloomberg, 2026-06-30) — https://www.bloomberg.com/news/articles/2026-06-30/susquehanna-can-subpoena-brokers-of-alleged-insider-traders
- SEC Probes Alleged Insider Trades That Cost Susquehanna Millions (Bloomberg, 2026-07-02) — https://www.bloomberg.com/news/articles/2026-07-02/sec-probes-alleged-insider-trades-that-cost-susquehanna-millions
- 자본시장범죄 양형기준 7월부터 강화 (시사저널e, 2026-06-28) — https://www.sisajournal-e.com/news/articleView.html?idxno=422004
- 미공개정보 전득자도 최고 과징금…증권사 임원 등은 검찰 고발 (EBN, 2026-05-21) — https://www.ebn.co.kr/news/articleView.html?idxno=1709602
[/SOURCES]

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