Involved in a case of HKD 1.4 billion, Hong Kong Securities and Futures Commission explains the next steps after the JPEX bankruptcy

HK Securities and Futures Commission explains next steps after JPEX bankruptcy involving HKD 1.4 billion.

Source: Hong Kong Commercial Daily

JPEX, a virtual asset trading platform, has been accused of fraud and triggered an incident after being specifically warned by the Hong Kong Securities and Futures Commission for falsely claiming to be applying for a license.

Subsequently, the Hong Kong police intervened in the investigation. As of 5 pm on September 23, the Hong Kong police received a total of 2,305 reports from victims, involving a total amount of HKD 1.43 billion, and arrested 11 people.

The Hong Kong police stated that the investigation is still ongoing and does not rule out the possibility of more arrests.

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On the morning of September 25, the Hong Kong Securities and Futures Commission held a press conference on the matter of the JPEX virtual asset trading platform, attended by the Chief Executive Officer of the Securities and Futures Commission, Leung Fung-yee, Executive Director of the Regulatory and Enforcement Division Wei Hongfu, and Director of the Fintech Group Huang Lexin.

01 Will publish 4 lists of virtual assets online

Leung Fung-yee stated that the JPEX incident demonstrates the risks of trading on unregulated virtual asset trading platforms and the need for appropriate regulation to maintain market confidence.

The incident also shows that the Securities and Futures Commission can strengthen information dissemination methods, including “List of Unlicensed Companies and Suspicious Websites,” issuing warnings, and investor education to help the general public better understand the potential risks posed by suspicious websites or virtual asset trading platforms. In light of this, the Securities and Futures Commission will implement the following measures:

1. Publish 4 lists of virtual asset trading platforms online to ensure clear, transparent, and timely information dissemination. These include:

1) “List of Licensed Virtual Asset Trading Platforms”;

2) “List of Closed Virtual Asset Trading Platforms,” listing the names of virtual asset trading platforms that are required to close within a specified period under the legislation;

3) “List of Virtual Asset Trading Platforms Treated as Licensed,” listing the names of virtual asset trading platforms treated as licensed until June 1, 2024;

4) “List of Virtual Asset Trading Platform Applicants” based on public demand.

2. To assist the public in identifying suspicious virtual asset trading platforms operating in Hong Kong and increase vigilance, the Securities and Futures Commission will optimize and publish a dedicated list of suspicious virtual asset trading platforms, which will be clearly displayed and easily accessible on the Commission’s website.

The Securities and Futures Commission will also consider providing more information on unregulated virtual asset trading platforms to enable the public to raise awareness early. This will ensure that information is disseminated in a clear, transparent, and timely manner.

3. The Securities and Futures Commission and the Investor Education Centre are preparing a series of public awareness campaigns to enhance anti-fraud awareness and will continue to strengthen investor education through various means, including mass media, social media, and educational seminars, to deepen public understanding of virtual asset-related risks and potential fraudulent activities.

4. The China Securities Regulatory Commission (CSRC) will continue to strengthen intelligence gathering and take legal action against suspected illegal virtual asset trading platforms within its statutory powers, and will refer the cases to the police if necessary.

The CSRC encourages the public to file complaints online about any suspicious activities they encounter. Public complaints are an important source of intelligence for the CSRC.

02 Establishing channels to share information with the police

The CSRC will explore the establishment of dedicated channels with the police to share information on suspicious activities and violations by virtual asset trading platforms, and will investigate the JPEX case to bring the perpetrators to justice.

In line with the principle of “same business, same risks, same rules,” the CSRC will continue to review Hong Kong’s regulatory system in response to new market trends and study timely regulatory measures, including considering regulating other virtual asset-related businesses outside of virtual asset trading platforms.

The CSRC will continue to cooperate with the Hong Kong SAR government and other regulatory agencies to protect the interests of investors and market confidence, as well as create a favorable business environment. Through regulated service providers, it will promote the sustainable and responsible development of the Web3 ecosystem in Hong Kong.

Leung Fung-yee reminded the public that scams are difficult to detect in advance. The public should be highly vigilant and guard against high-interest traps. They should not blindly trust online KOL recommendations. If they want to invest, they should use regulated virtual asset platforms.

03 Four companies are applying for licenses

Huang Lexin, head of the CSRC’s Fintech Department, said that the list of applicants was made public in response to public demand, allowing the public to know whether the platforms have made false statements in applying for licenses. Currently, there are four companies in the preliminary stage of applying for licenses, including “HKVAX,” “Hong Kong Digital Asset EX Limited (HKbitEx),” “Hong Kong BGE Limited,” and “Victory Fintech ComLianGuainy Limited.”

Huang Lexin reminded that all the platforms on the list are only applying for licenses and have not yet been granted licenses. If investors want to make transactions, they should refer to the CSRC’s list of licensed trading platforms.

Leung Fung-yee mentioned that there are currently many platforms in the market claiming to be applying or preparing to apply for licenses. The public can use the list to verify whether a platform has applied, but it does not mean that the platform meets the regulatory requirements of the CSRC.

Leung Fung-yee said that the CSRC will also establish a dedicated list for suspicious platforms and provide more information on unregulated platforms, strengthen investor education to raise awareness of fraud prevention, and strengthen intelligence gathering to take legal action as soon as possible and encourage the public to file complaints with the CSRC.

04 Legislative Council Financial Committee to discuss regulation of virtual asset trading platforms next month

The Financial Affairs Committee of the Hong Kong Legislative Council (FAC) will discuss the regulation of virtual asset trading platforms on 9th next month.

The Chairman of FAC, Christopher Cheung, said that he has invited the Chairman of the Securities and Futures Commission (SFC), Tim Lui, and the Chief Executive Officer, Ashley Alder, to attend the meeting. He hopes that the SFC will be able to publicly disclose the names of suspicious institutions as soon as possible, and introduce “grounded” promotional methods to enable investors to take timely precautions and promote the development of the industry.

Cheung said that the SFC has announced that it will further enhance information disclosure and optimize the existing system. This includes publishing the list of licensed virtual asset trading platforms, the list of closed platforms, the list of platforms that have been considered for licensing, and the list of applicants that are of most concern to the public. He described it as a long-awaited spring and believes that the new arrangements can strengthen transparency and investor confidence, provide investors with more specific and clear information, and facilitate media and public supervision.

He believes that in addition to publishing information on its website, the SFC should also conduct public promotion through more diverse and “grounded” methods. This includes holding press conferences, using social platforms to update information in a timely manner, etc. Especially in the event of emergencies, efforts should be made to strengthen the efficiency of immediate and crisis handling.

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