- The alleged fraud affected more than 1,600 investors
- JPEX staff and influencers who promoted the exchange were arrested
Hong Kong authorities have arrested eight people over accusations of fraud at JPEX, an unlicensed cryptocurrency exchange. The alleged fraud affected more than 1,600 investors and assets worth over $150 million, The Associated Press reported last night.
Low risk, high returns
Among those arrested are JPEX staff and social media influencers who promoted the exchange. According to Police Senior Superintendent Kung Hing-fun, the victims were mostly laymen who had fallen for promises of low risk and high returns.
AML legislation violated
According to Elizabeth Wong, head of the Securities and Futures Commission’s (SFC) fintech unit, authorities are looking into whether JPEX has broken anti-money laundering laws. The unit has referred the case to the police to help with the investigation.
Investors found randomly reduced balances
Last week, the SFC announced that JPEX was unlicensed and not allowed to operate a cryptocurrency trading platform in Hong Kong. Some clients complained they couldn’t withdraw their digital assets from their accounts with the exchange. Others found their balances had been altered or reduced.
JPEX suspends trading, accuses HK government
On Monday, JPEX announced it was suspending trading on its platform due to liquidity shortage, which it was “negotiating with … third-party market makers to resolve.”
A day earlier, the exchange had complained Hong Kong institutions were treating it unfairly. They went on to accuse an anonymous third-party market maker of “malevolently” freezing funds.
Police have received 1,641 complaints about JPEX involving the equivalent of $153 million USD. They have frozen bank accounts worth $1 million and confiscated properties valued at $5.6 million.
Chinese crypto firms fled to HK after ban
Mainland China banned cryptocurrency transactions in 2021 and outlawed transactions from within its territory on foreign exchanges as well. As a result, Chinese cryptocurrency firms fled to Hong Kong. Along with the US and Switzerland, Hong Kong is considered the best-prepared territory to accept crypto in the world.
Hong Kong chief executive John Lee commented on the incident at a news conference:
This incident highlights the importance that when investors want to invest in virtual assets, then they must invest on platforms that are licensed.
Hong Kong has had the reputation of a crypto hub for some time. The SFC started to accept applications for cryptocurrency exchanges on June 1 this year. Licensed platforms can serve retail investors as long as they inform them of the risks.
