Futu Holdings Limited (FUTU) Securities Class Action Lawsuit Update

• Company: Futu Holdings Limited (NASDAQ: FUTU)
• Lead Plaintiff Deadline: August 25, 2026
• Class Period: May 24, 2023 - May 27, 2026
• Stock Drop: May 22, 2026 - FUTU fell $34.10 (27.5%) to $89.76; May 28, 2026 - FUTU fell $5.31 (4.8%) to $104.91

Introduction

A securities class action has been filed against Futu Holdings Limited and two of its senior executives in the United States District Court for the Southern District of New York. The complaint covers a class period spanning from May 24, 2023 through May 27, 2026, and names as defendants the company itself, Chief Executive Officer Leaf Hua Li, and Chief Financial Officer Arthur Yu Chen.

For three years, Futu presented investors with a portrait of accelerating growth. Quarter after quarter, press releases touted growing client counts, increasing client assets, and substantial year-over-year revenue growth. Behind that narrative, however, the complaint alleges a critical truth was concealed: Futu entities in mainland China and Hong Kong were continuing to conduct securities brokerage, public fund sales, and futures business on the mainland without the licenses or approvals required by Chinese law. Despite a December 2022 CSRC statement, the complaint alleges that Futu failed to disclose that it remained out of compliance and was reasonably likely to face penalties, instead framing enforcement risk in conditional terms that allegedly obscured the severity of the situation.

The reckoning arrived on May 22, 2026. Reuters reported that the CSRC, backed by seven other government agencies including China's central bank, had launched a sweeping crackdown on illegal cross-border securities activity, singling out Futu by name. Futu itself disclosed receiving a formal penalty notification proposing fines and disgorgement totaling approximately RMB 1.85 billion (roughly $271 million). The stock cratered, falling $34.10, or 27.5%, in a single session to close at $89.76 on enormous volume. Six days later, when the company released first-quarter 2026 results reflecting the proposed penalties’ financial impact, shares dropped another $5.31, or 4.8%, to close at $104.91.

Backdrop and Business Context

Futu Holdings Limited traces its operating history to Futu Securities International (Hong Kong) Limited, which was incorporated in Hong Kong by Leaf Hua Li in April 2012; Futu Holdings Limited was later incorporated in the Cayman Islands in 2014. Li was a former senior Tencent executive who had joined the tech giant as its eighteenth employee in 2000. Futu positioned itself as a fully digital, technology-driven brokerage platform focused on access to global securities markets for retail investors. On March 8, 2019, Futu listed its American Depositary Shares on the Nasdaq Global Market at an offering price of $12.00 per ADS, raising approximately $90 million in gross proceeds.

Futu operates through two flagship platforms: Futubull, its original app aimed at Hong Kong and Asian investors, and moomoo, a global brand launched in 2018 and deployed across the United States, Singapore, Australia, Japan, Canada, Malaysia, and New Zealand. The company generates revenue primarily through brokerage commissions and fees, interest income from margin financing and securities lending, wealth management product distribution fees, and corporate services such as employee stock ownership plan administration. For the full year 2025, Futu reported total revenues of approximately HK$22.8 billion (roughly $2.9 billion), an increase of 68% over the prior year. The company reported over 29 million users across more than 200 countries as of late 2025.

A portion of Futu’s business involved mainland Chinese investors using offshore platforms to access Hong Kong and U.S. equity markets, creating regulatory exposure that the complaint alleges was not fully disclosed. That exposure made the company vulnerable to regulatory action from the CSRC, which had publicly flagged Futu’s unlicensed cross-border operations as early as December 2022. According to the complaint, this risk was not merely theoretical because Futu allegedly remained out of compliance and was reasonably likely to face regulatory penalties.

Promises Made vs. Reality

Throughout the class period, Futu projected an image of relentless, well-managed growth. Beginning with its first-quarter 2023 earnings announcement on May 24, 2023, the company highlighted a 15.2% year-over-year increase in paying clients, a 52.3% surge in total revenues to HK$2.5 billion, and net income that more than doubled. These figures set the tone for a three-year cadence of increasingly bullish disclosures. By the fourth quarter of 2025, management reported total revenues of HK$6.4 billion for the quarter alone, paying client growth of nearly 40%, and total client assets exceeding HK$1.2 trillion.

As the financial results grew more impressive, so did the company’s regulatory risk disclosures, but only in form, not in substance. In its fiscal year 2023 annual report filed with the SEC on April 24, 2024, the company acknowledged the CSRC’s December 2022 inquiry and stated that it had “taken and may continue to take rectification measures” in response. The report characterized potential penalties in conditional terms, noting that “we have limited information to accurately predict if any disciplinary action or punishment will be taken against us and/or our officers.” The fiscal year 2024 annual report, filed on April 14, 2025, repeated substantially similar “limited information” language. The fiscal year 2025 annual report, filed on April 15, 2026, stated that Futu did not have sufficient information to predict whether disciplinary action or punishment would be taken and could not foresee the nature, scope, or timing of any such action.

The complaint alleges that this carefully calibrated uncertainty was misleading. While Futu framed CSRC enforcement as a possibility that “may” or “could” occur, its entities in mainland China and Hong Kong were, according to the CSRC itself, actively conducting securities business, public fund sales business, and futures business without the required licenses. According to the complaint and Futu’s disclosure of the CSRC Pre-Notification Letter, the CSRC stated that certain Futu entities had conducted securities, public fund sales, and futures business in mainland China without required licenses or approvals. The complaint further alleges that Futu’s reported financial results were overstated because they included revenues allegedly generated from unlicensed mainland securities-related activities, revenues that the CSRC would ultimately seek to disgorge as “illegal gains.”

The truth surfaced in two waves. On May 22, 2026, Reuters reported that the CSRC and seven other government agencies had launched a sweeping crackdown on cross-border securities activity, naming Futu alongside Tiger Brokers and Longbridge as targets. Futu confirmed receipt of a penalty notification letter proposing fines and disgorgement totaling approximately RMB 1.85 billion, roughly $271 million, and disclosed that its CEO faced a personal fine of RMB 1.25 million. Six days later, the company's first-quarter 2026 earnings release quantified the damage, recording the proposed penalties as a charge in its financial statements, consisting of proposed confiscation of approximately RMB 470 million in illegal gains and proposed fines of approximately RMB 1.38 billion.

As alleged in the complaint, the pattern was not one of genuine uncertainty about regulatory risk but rather a sustained failure to disclose that Futu was already operating in violation of Chinese law, that penalties were reasonably likely, and that the company's reported financial results were inflated by revenues generated from unlicensed activities.

Timeline of Alleged Misconduct and Disclosures

Class Period: May 24, 2023 - May 27, 2026, inclusive.

December 30, 2022: CSRC issues statement that Futu has conducted cross-border securities businesses with domestic investors in mainland China without regulatory consent. Futu banned from opening new mainland accounts.

May 16, 2023: Media reports that the Futu app would be removed from app stores in China.

May 24, 2023: Class period opens. Futu issues Q1 2023 earnings press release touting 15.2% year-over-year increase in paying clients and 52.3% revenue growth.

August 24, 2023: Futu issues Q2 2023 earnings press release reporting continued growth in paying clients and 42.3% revenue increase.

November 23, 2023: Futu issues Q3 2023 earnings press release reporting 14.2% year-over-year paying client growth and 36.2% revenue increase.

March 14, 2024: Futu issues Q4 and full year 2023 earnings press release reporting full-year revenues of HK$10.0 billion, up 31.4%.

April 24, 2024: Futu files FY23 20-F with the SEC, acknowledging CSRC inquiry but characterizing potential penalties in hypothetical terms.

May 28, 2024: Futu issues Q1 2024 earnings press release reporting 23.5% year-over-year increase in paying clients.

August 20, 2024: Futu issues Q2 2024 earnings press release reporting 28.8% paying client growth and 25.9% revenue increase.

November 19, 2024: Futu issues Q3 2024 earnings press release reporting 33.1% paying client growth and 29.6% revenue increase.

March 13, 2025: Futu issues Q4 and full year 2024 earnings press release reporting full-year revenues of HK$13.6 billion, up 35.8%.

April 14, 2025: Futu files FY24 20-F with the SEC, again using conditional language regarding CSRC enforcement.

May 29, 2025: Futu issues Q1 2025 earnings press release reporting 41.6% funded account growth and 81.1% revenue increase.

August 20, 2025: Futu issues Q2 2025 earnings press release reporting 40.9% funded account growth and 69.7% revenue increase.

October 31, 2025: FUTU shares close at class period high of $199.04.

November 18, 2025: Futu issues Q3 2025 earnings press release reporting 42.6% funded account growth and 86.3% revenue increase.

March 12, 2026: Futu issues Q4 and full year 2025 earnings press release reporting full-year revenues of HK$22.8 billion, up 68.1%.

April 15, 2026: Futu files FY25 20-F with the SEC, repeating conditional risk factor language regarding CSRC penalties.

May 22, 2026: Alleged corrective disclosure. Reuters reports CSRC crackdown on illegal cross-border securities activity, naming Futu. Futu discloses receipt of CSRC penalty notification proposing approximately RMB 1.85 billion in fines and disgorgement. FUTU shares fall $34.10 (27.5%) to close at $89.76.

May 27, 2026: Class period ends.

May 28, 2026: Additional alleged corrective disclosure. Futu issues Q1 2026 earnings reflecting the CSRC penalty as a financial statement charge. FUTU shares fall $5.31 (4.8%) to close at $104.91.

June 4, 2026: Business Times reports Futu will halt services for opening or adding to positions and transferring funds for mainland Chinese investors beginning June 12, complying with CSRC directive to wind down illegal activities within two years.

Investor Harm and Market Reaction

The primary corrective disclosure struck on May 22, 2026. When Reuters reported the CSRC's multi-agency crackdown and Futu confirmed receiving a penalty notification totaling approximately RMB 1.85 billion (roughly $271 million), shares of FUTU plunged $34.10, or 27.5%, closing at $89.76 on unusually heavy trading volume. The sell-off had begun in pre-market trading, with shares falling more than 30% before the opening bell.

Six days later, on May 28, 2026, Futu released its first-quarter 2026 financial results, which for the first time reflected the proposed penalties in the company’s financial statements. Futu reported net income of HK$831.0 million after reflecting the proposed penalties in its financial statements. FUTU shares fell another $5.31, or 4.8%, to close at $104.91, again on unusually heavy volume.

The magnitude of the decline is underscored by comparison to the class period high. On October 31, 2025, FUTU had closed at $199.04 per share. By the close of trading on May 22, 2026, the stock had lost more than 54% of its peak value. The complaint alleges that, across the two alleged disclosure events, FUTU shares declined by $39.41 in the aggregate based on the complaint’s reported one-day drops. The complaint further alleges that investors who purchased Futu securities during the class period suffered losses when the alleged truth was revealed.

Litigation & Procedural Posture

The complaint asserts claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder against all defendants, and under Section 20(a) of the Exchange Act against the individual defendants as controlling persons of Futu.

The named defendants are Futu Holdings Limited, Leaf Hua Li (Chief Executive Officer), and Arthur Yu Chen (Chief Financial Officer).

Scienter allegations center on the individual defendants' positions as CEO and CFO, which gave them the power and authority to control the contents of Futu's SEC filings, press releases, and investor communications. The complaint alleges that by virtue of their roles and access to material nonpublic information, Li and Chen knew that the company was operating in violation of CSRC requirements and that positive statements about the company's business, operations, and prospects were materially false or misleading. The complaint further alleges that Li and Chen were provided with copies of the company's reports and press releases prior to or shortly after issuance and had the ability to prevent their dissemination or cause them to be corrected. No insider sales are specifically detailed in the complaint, and no confidential witnesses are cited.

Procedurally, the case was filed on June 26, 2026 in the Southern District of New York. Lead plaintiff submissions are due August 25, 2026. Class certification has not yet been ruled on. The complaint seeks class-wide compensatory damages, costs, and further relief on behalf of all persons and entities that purchased or otherwise acquired Futu securities between May 24, 2023 and May 27, 2026 and were damaged thereby.

SEC Filings & Risk Factors

The complaint targets a pattern of disclosure across Futu's SEC filings during the class period, particularly three successive annual reports on Form 20-F, each of which acknowledged the CSRC inquiry but framed the possibility of enforcement action in language that allegedly obscured the true state of affairs.

The fiscal year 2023 Form 20-F, filed on April 24, 2024, disclosed that the CSRC had "initiated inquiries" regarding Futu's cross-border operations and that the company had "taken and may continue to take rectification measures." The filing stated: "As of the date of this annual report, we have limited information to accurately predict if any disciplinary action or punishment will be taken against us and/or our officers after the conclusion of such inquiries, and if so, the nature and extent of any such action." The risk factors section warned that "if the CSRC pursues further regulatory actions or imposes penalties on us, including but not limited to fines, suspension of parts or all of our operations or activities in Mainland China, they may, individually or taken as a whole, have a material and adverse impact on our operations and financial results." The use of "if" and "may" framed the risk as contingent and prospective.

The fiscal year 2024 Form 20-F, filed on April 14, 2025, repeated substantially similar “limited information” language. The fiscal year 2025 Form 20-F, filed on April 15, 2026, later stated that Futu did not have sufficient information to predict whether disciplinary action or punishment would be taken and could not foresee the nature, scope, or timing of any such action. It added a new sentence noting that the CSRC could act “independently or jointly with other authorities,” but still framed penalties in hypothetical terms: they “could” lead to additional investigations or enforcement measures.

Each quarterly earnings press release alleged to be misleading during the class period, from Q1 2023 through Q4/full-year 2025, presented financial results that the complaint alleges were overstated because they included revenues generated from the unlicensed mainland operations. The complaint does not identify specific quarterly filings as independent misstatement instances beyond the press releases and annual reports, but alleges that the cumulative effect of these disclosures was to inflate the market price of Futu’s securities.

The overall pattern, according to the complaint, was one of boilerplate risk factor disclosure that treated a known, ongoing regulatory violation as a hypothetical future event. The company disclosed that it did not hold licenses or permits for providing securities brokerage services in mainland China. It disclosed that the CSRC had initiated inquiries. But it framed these facts alongside conditional language ("if," "may," "could") and statements of uncertainty ("limited information to accurately predict," "cannot foresee") that, the complaint alleges, were misleading in light of the company's actual knowledge that it continued to conduct unlicensed business in violation of Chinese law. The risk factors treated as hypothetical what had, according to the CSRC's own findings, already materialized: Futu was allegedly operating illegally, and the complaint alleges that penalties were reasonably likely because of Futu’s alleged ongoing noncompliance.

How to Check Eligibility in the Futu Holdings (FUTU) Class Action

• Confirm you purchased FUTU ADSs during the May 24, 2023 to May 27, 2026 class period
• Review the allegations and eligibility requirements in the pending securities class action
• Gather trade confirmations and brokerage records documenting purchases or losses
• Consult counsel regarding lead plaintiff deadline, eligibility, and any potential rights in the litigation

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