Hong Kong regulators intensify their investigation into JPEX trading platform.

Hong Kong regulators investigate JPEX trading platform more intensely.

Author: Sebastian Sinclair Blockworks Compilation: Shanolabar, LianGuai

The Securities and Futures Commission describes the scandal surrounding the virtual asset trading platform JPEX as the largest financial fraud case in Hong Kong’s history. The number of victims is said to have increased to 2,086, with reported losses reaching HKD 1.3 billion (approximately USD 166 million). Three more people have been arrested, bringing the total number of arrests to 11.

The Securities and Futures Commission issued a statement on Thursday denying any communication with JPEX and accusing the platform of lying about “any potential license application” and contact with regulatory authorities. JPEX has been uncooperative and unable to provide substantial responses to the commission’s requests, leading to JPEX being included in the commission’s warning list in July 2022. The regulatory agency also criticized JPEX for allegedly disclosing confidential correspondence, violating the Securities and Futures Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance in Hong Kong.

On Tuesday, authorities announced the freezing of a bank account worth HKD 15 million (USD 1 million) and the seizure of three properties worth HKD 44 million (USD 5.6 million). Local media reports indicate that over 1,600 complaints have been received against JPEX, involving amounts of up to HKD 1.2 billion (USD 153 million). The Securities and Futures Commission issued a warning to JPEX last week, urging investors to only use licensed and regulated platforms for cryptocurrency trading. Following the warning, the number of victims increased significantly, leading to escalated police actions.

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According to several local media reports, telecom companies such as SmarTone, CSL Mobile, and Three have blocked local access to the JPEX website at the request of the local police.

The Licensing Dilemma Under the New System

Since June 1, 2022, Hong Kong authorities have implemented a new licensing system for virtual asset service providers. After a challenging year for the industry, this move opens the door for retail cryptocurrency trading, as the industry continues to grapple with the impact of the FTX crash in November. The Securities and Futures Commission revealed that although JPEX, registered in 2019, had the opportunity to comply with the regulations during the transition period, the company neither applied for a license nor showed any intention to do so.

The ongoing investigation by the police further confirms the position of the Securities and Futures Commission. Recently arrested individuals include two social media influencers, and as the case unfolds, the number of victims and economic losses continue to rise.

JPEX is accused of advertising financial products with annual yields exceeding 20% and collaborating with off-exchange cryptocurrency shops and key influencers to expand its influence, all of which reportedly took place without proper licensing.

Blockworks has contacted the Securities and Futures Commission and JPEX but has not yet received a response.

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