Major Fraud Investigation Underway for JPEX Cryptocurrency Trading Platform in Hong Kong


Hong Kong authorities are conducting a thorough investigation into allegations of fraud against the cryptocurrency trading platform, JPEX, after investors reported staggering losses of HK$1.3 billion ($166 million; £134 million).

This week, eleven individuals, including influential figures, were apprehended following complaints filed by 2,000 affected parties. Local media suggests that this case could emerge as one of the largest fraud instances in Hong Kong's history.

The situation also serves as a litmus test for new financial regulations, as Hong Kong strives to position itself as a global hub for virtual assets.

Last week, the Hong Kong Securities and Futures Commission (SFC) disclosed that the Dubai-based JPEX had been operating without a license for virtual asset trading. In response, the platform contended that it had diligently attempted to comply with local requirements, which took effect in June of this year. However, the Commission allegedly disregarded or circumvented these efforts through official channels.

Authorities revealed that many of the complainants were inexperienced investors who were promised substantial returns. Additionally, JPEX extensively advertised, utilizing popular influencers and conspicuous billboards within Hong Kong's MTR train system.

Local television broadcasts featured footage of police escorting one of the arrested influencers, Joseph Lam, from his residence following a raid. Mr. Lam, a former barrister turned insurance salesman, portrays himself on Instagram as Hong Kong's "Trolling King". In his posts, Lam showcased how Bitcoin profits could facilitate home purchases and bolster social standing.

Another individual detained was Chan Yee, a YouTube personality with 200,000 subscribers.

In light of the arrests, certain trading activities on JPEX have been suspended in Hong Kong. Additionally, authorities seem to have restricted web access to the platform. JPEX has also stated that it is working to address a "liquidity shortage" as some users report difficulties withdrawing their funds.

Hong Kong Chief Executive John Lee affirmed that regulators would be closely monitoring the situation to ensure the protection of investors. He emphasized the importance of investing in licensed platforms when dealing with virtual assets.

Since June of this year, Hong Kong has mandated that virtual asset trading platforms obtain licensing from the SFC, a measure stemming from amendments to the Anti-Money Laundering and Counter-Terrorist Financing law enacted in late 2022.

Mr. Lee announced that the government would intensify efforts to educate investors, enabling them to better comprehend risks and regulatory oversight.

While cryptocurrencies have long raised concerns due to their lack of central bank regulation, they continue to attract consumers with the promise of peer-to-peer digital currencies.

Hong Kong, a prominent financial hub in Asia, is striving to establish itself as a center for the next wave of internet technologies, including cryptocurrency trading (referred to as Web 3.0). Since late 2021, China has prohibited cryptocurrencies on the mainland, citing concerns about the safety of individuals' assets.

The licensing requirement for platforms like JPEX aims to establish accountability and facilitate compensation when necessary, according to Francis Fong, honorary president of the Hong Kong Information Technology Federation.

However, some experts in the digital economy caution that existing laws may not be sufficient to prevent illegal operations by virtual asset platforms or safeguard investors from losses.

On Facebook, distressed investors have formed groups titled "JPEX Sufferers", expressing their grievances.

One group member stated that he was enticed by JPEX due to the prevalence of its MTR advertisements. Criticism from internet commentator Fung Hei-kin garnered significant support.

According to its website, JPEX is headquartered in Dubai, United Arab Emirates, and is authorized to facilitate digital asset trades in the US, Canada, and Australia. The "About Us" section displays blurry images that appear to be licenses from these three countries.

JPEX, established in 2020, claims to have handled $2 billion worth of assets and aspires to be one of the world's top five virtual asset exchanges.

A check by Hong Kong's South China Morning Post revealed that JPEX's Hong Kong address is occupied by a co-working company called Coffee, and staff were unaware of JPEX. Hong Kong police had reportedly visited the address previously.

Reports indicate that JPEX also maintains an office in Taiwan, but recent checks found it unoccupied. The platform had enlisted popular Taiwanese celebrity, Nine Chen, as an influencer and had sponsored a boxing match on the island.

Chen expressed his current inability to contact relevant individuals at JPEX and assured full cooperation with any necessary investigations.