Hong Kong’s financial regulator, the Securities and Futures Commission (SFC), has vowed to step up its efforts to crack down on unregulated cryptocurrency trading platforms in its jurisdiction. According to an announcement on 25 September, the SFC said it would publish a list of all licensed, deemed to be licensed, closing virtual asset trading platforms (VATPs) pending applications to better assist members of the public in identifying potentially unregulated VATPs doing business in Hong Kong. In addition, the SFC said it will issue a special list of “suspicious VATPs” which will be posted on an easily accessible and visible part of the regulators’ website.
The move comes on the heels of the recent scandal involving cryptocurrency exchange JPEX, which had an estimated financial impact of around $178 million. At the time of publication, local police had received more than 2,200 complaints from affected exchange users. The SFC said the implications of JPEX “highlight the risks associated with unregulated VATP and the need for appropriate regulation to maintain market confidence.” In addition, the SFC said it would work with local police to establish a dedicated channel for citizens to share information about suspicious activity and potential violations of the law by VATP, as well as to improve the investigation into the JPEX incident to help “bring those responsible to justice.”
Meanwhile, the masterminds behind Hong Kong’s alleged JPEX cryptocurrency exchange scandal, which some are calling the biggest financial scam to ever hit the city, have eluded authorities despite 11 people already being detained for questioning in the case. According to a report by the South China Morning Post on September 23, police have received more than 2,265 complaints from victims of the exchange, and the total monetary cost of the fallout is estimated at around $178 million (HK$1.4 billion). The complaints appear to be related to difficulties in withdrawing cryptocurrency from the platform. On September 15, the JPEX exchange increased its withdrawal fee to 999 Tether (USDT).
In connection with the scandal, police also arrested three employees of tech support company JPEX, as well as two YouTubers, Chan Wing Yee and Chu Ka Fai, who have a combined total of more than 200,000 subscribers. Currently, the list of people taken into custody for questioning also includes crypto influencer Joseph Lam Chok, who has repeatedly tried to publicly distance himself from the exchange. Others wanted or detained for questioning include the company’s sole director Kwok Kholun, a restaurant director and three celebrities who have reportedly promoted JPEX in some form or another in the past. However, Hong Kong authorities said the exchange’s masterminds were still on the run. Police added that the investigation is ongoing and that more arrests are likely in the near future. Local police have also reportedly enlisted the help of Interpol and other international law enforcement agencies after they discovered suspicious cryptocurrency transfers being made from the JPEX exchange. The police also demanded that local telecommunications providers block access to the exchange website.
During the Token2049 conference in Singapore on September 13, the JPEX team allegedly abandoned its corporate booth after Hong Kong police arrested six employees on fraud charges for operating an unlicensed crypto exchange. The exchange later shut down a number of its income products and increased withdrawal fees to $999, while accusing its third-party market makers of “maliciously” freezing liquidity. At the time, the company said it had attempted to register with the relevant authorities and cited “unfair” treatment by regulators including the Securities and Futures Commission (SFC). In a statement on September 20, the SFC said JPEX was operating without a license to trade virtual assets. According to the official website, JPEX is seeking to be headquartered in Dubai and licensed to trade cryptocurrency in the US, Canada and Australia. Founded in 2020, JPEX said it controls about $2 billion in assets and said its goal is to become one of the top five largest cryptocurrency exchanges in the world.