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

Cross-border internet brokers are engaged in “illegal financial activities” because they have no “driving licenses” to operate in China, something that’s unrelated to the convertibility of China’s capital account, Sun Tianqi, a senior PBOC official wrote in an article published on the website of Finance 40 Forum.

Tencent Holdings Ltd.-backed Futu Holdings Ltd. tumbled as much as 31% in U.S. premarket trading while Xiaomi Corp.-backed Up Fintech Holding Ltd. fell up as much as 23%. 

China has been tightening control 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 offshore in markets such as Hong Kong and New York. 

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

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

“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, the capital is ample and there is no problem of bankruptcy, he added.

©2021 Bloomberg L.P.