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China’s largest cross-border brokers plummeted in U.S. premarket trading after a central bank official questioned the legitimacy of their operations amid Beijing’s continuing crackdown on private enterprise.

These online brokers are engaged in “illegal financial activities” because they have no “driving licenses” to operate in China, Sun Tianqi, a senior People’s Bank of China official wrote in an article published on the website of Finance 40 Forum. Sun didn’t name the brokers, and added that calling them illegal has nothing to do China’s capital control rules.

Tencent Holdings Ltd.-backed Futu Holdings Ltd. tumbled as much as 31% in premarket trading while Xiaomi Corp.-backed Up Fintech Holding Ltd., known as Tiger Brokers, fell as much as 23%. Both stocks have soared since the firms went public in New York in 2019.

China has been tightening controls over broad swathes of its economy, in particular cracking down on firms that collect data from consumers such as ride-hailing apps and other technology giants. Futu and Up Fintech have been operating in a gray area, allowing millions of Chinese investors to evade capital controls to trade shares in markets such as Hong Kong and New York.

This “seems consistent with what China has been doing to rein in capital outflows leakages — via crypto assets or any cross-border venue,” said Derek Tay, head of investments at Kamet Capital Partners Pte.

In an analysis earlier this month, the People’s Daily said online brokerages operating across borders run the risk of violating data privacy rules. The firms are in the spotlight as China’s personal information protection law takes effect on Nov. 1. The article said user data of both brokers are at risk of being compromised as they are required to provide information to the U.S. Securities and Exchange Commission.

Sun, the central bank official, said one company, registered in the Cayman Islands, received 80% of its funds from mainland China, while another Hong Kong-based company received 55%. He didn’t name the firms.

This isn’t the first time Sun has criticized the legitimacy of cross-border activities. In an article he wrote for state-run China Forex in 2018, Sun said China’s regulators have not approved any institution to conduct foreign exchange margin trading in the domestic market, and that any form of such activities is illegal.

Securities Times reported earlier this month that regulators are working on rules to regulate businesses of online brokerages, citing an unidentified person close to the regulator.

“Since Futu Securities became a licensed institution under the supervision of the Securities and Futures Commission of Hong Kong, the institution has been running well without any bad regulatory records,” Futu founder Leaf Li said in a statement on Thursday.

Futu Holdings has raised more than HK $15 billion ($1.9 billion) in the past year and the proceeds are mostly going to support Futu Securities’ business operations, he said. The capital is ample and there is no risk of bankruptcy, he added.

“Tiger Brokers has the same business model as other U.S., Hong Kong brokers,” Up Fintech said in a statement. “We strictly abide with regulations globally.”

Both Futu and Up Fintech had soared since their debut more than two years ago. Up Fintech traded as high as $38.50, four times more than its offering price of $8 when it was taken public by banks including Citigroup Inc. and Deutsche Bank. Futu topped $200 after its $12 launch in a listing led by Goldman Sachs Group Inc., Credit Suisse Group AG and other banks.

Another online broker, Webull, is weighing a U.S. initial public offering that could raise about $300 million to $400 million, people with knowledge of the matter said in June. The Changsha, Hunan-based company is working with Goldman Sachs to prepare for the sale, which could take place as soon as this year, the people said at the time.

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