(Yicai) Oct. 14 -- Hong Kong's securities regulator has moved against two syndicates suspected of involvement in three alleged initial public offering fraud schemes, freezing assets worth a record nearly HKD4.7 billion (USD594 million).

The Securities and Futures Commission issued restriction notices to 31 brokerages, covering a combined HKD4.66 billion of assets linked to the two syndicates, it announced yesterday.

The three companies involved are Baicha Baidao Industrial [HKG: 2555], which operates the popular bubble tea chain ChaPanda; Cloudbreak Pharma [HKG: 2592], a developer of eye drugs; and Tianju Dihe Suzhou Technology [HKG: 2479], which provides application programming interface services.

Trading in Baicha Baidao's shares was halted yesterday at the SFC's direction over concerns that the Chengdu-based company’s IPO in 2024 may have been rigged to create a false impression of investor demand. Cloudbreak Pharma's stock has been suspended since mid-September, and Tianju Dihe's since April last year.

“We maintain a zero-tolerance policy toward any form of IPO rigging, price manipulation, or the creation of a false market,” SFC Chief Executive Julia Leung said, adding that the watchdog would take targeted and proportionate action to promote sustainable market development.

The suspected fraud cases may have involved diverting IPO proceeds into purported financial product investments before secretly channeling the funds back to major IPO investors or their connected parties, according to the SFC.

The first group under suspicion comprises Sun Ran, a licensed representative of Harvest Global Capital Investments, and eight related companies. That group is suspected of involvement in fraudulent schemes linked to the IPOs of Cloudbreak Pharma and Baicha Baidao, with as much as HKD4.4 billion of assets frozen.

Of the eight companies linked to Sun, six are incorporated in the British Virgin Islands, one in the Seychelles and one in Samoa, according to publicly available information.

The second suspected syndicate, consisting of Liu Haoran and two companies, is suspected of involvement in a fraudulent scheme related to Tianju Dihe's IPO. The SFC froze HKD285 million (USD36.3 million) of assets linked to that group.

The SFC said the suspected groups may have used undisclosed agreements with the listed companies to arrange the transfers, disguising them as investments in financial products.

Editor: Emmi Laine