Unlicensed cryptocurrency exchange collapse, how should users protect themselves?

How to Protect Yourself as an Unlicensed Cryptocurrency Exchange Collapses

Source: Beosin

Recently, according to the media report from “Hong Kong 01,” as of November 25th, the fraudulent investment platform “Hounax” has deceived at least 131 people. The police have received 88 reported cases, involving a total amount of 110 million yuan.

Previously, HOUNAX, a cryptocurrency trading platform, actively attracted users in Hong Kong. It claimed to be co-founded by the former technical team of Coinbase and holds an MSB license in Canada. This is a major fraudulent investment platform scam that occurred in Hong Kong following the JPEX exchange scam.

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This Hounax incident has once again shaken up the Hong Kong Web3.0 investment market, especially after the JPEX exchange scam. Investors are now more vigilant about fraudulent platforms.

These incidents remind us that investors must remain highly cautious and conduct thorough due diligence and careful evaluation before participating in any investment activities. Understanding the background of the platform, regulatory situation, and feedback from other users are essential to avoid becoming victims.

“Hounax” Scam Tactics

Last week, “Hong Kong 01” pointed out that one victim joined a stock investment group through a social networking site at the end of August. Due to the limited profits, they were persuaded to invest in virtual currencies and download an application called “HOUNAX.”

One victim, Ms. Zhu, described that she invested over 2 million yuan and earned over 10 million yuan in profit after a period of time. However, when she wanted to withdraw her funds, she was told to pay a 5% margin or her account would be frozen, leaving her empty-handed.

Many victims who encountered the same situation formed a “HOUNAX Victims Group” on Facebook. One victim posted a notice supposedly from “HOUNAX Global Digital Asset Trading Center, Cryptocurrency Asia-Pacific Region (Singapore) Exchange,” which stated that certain users’ bank accounts were frozen due to the inflow of black money into HOUNAX.

Some victims pointed out that in the WhatsApp investment group where they were lured to download the HOUNAX application, many people claimed to have successfully withdrawn funds and even expressed plans to travel, buy properties, and indulge in luxury purchases. However, the victims revealed that these were all staged by the platform and not real users.

Another victim in the Facebook group claimed that after other victims paid the margin, they hoped to withdraw the remaining assets. However, the platform demanded an additional 3% withdrawal fee, which they were unable to pay.

Since the news came out on November 1st, HOUNAX has been secretly deleting user comments on all its social media platforms, including Facebook, X, and YouTube channels. All comments have been removed, although occasional real-time comments that criticize the platform’s credibility are still present.

Multiple platforms listed as suspicious by Hong Kong SFC

Scams involving fraudulent investment platforms are a common financial crime aimed at deceiving investors for illicit gains.

Following JPEX Exchange, the Securities and Futures Commission (SFC) in Hong Kong has added HOUNAX to its “suspicious virtual asset trading platforms” list on November 1st, prompting the public to remain vigilant about the platform’s legitimacy and security, just like with JPEX before.

A list of unlicensed companies and suspicious websites has been compiled, which consists of companies that have not obtained licenses in Hong Kong and have attracted the attention of the SFC. These companies are suspected of targeting Hong Kong investors or claiming to have connections with Hong Kong.

List of unlicensed companies and suspicious websites: https://sc.sfc.hk/TuniS/www.sfc.hk/TC/alert-list

These platforms often entice investors with high returns and low-risk investment opportunities. However, once investors deposit funds into these fraudulent platforms, they often encounter issues such as funds being unable to be withdrawn, accounts being frozen, or fake transaction records, ultimately resulting in financial losses.

SafeTrade accused of “running away”

Recently, the trading platform SafeTrade Exchange has been accused of running away, leaving users defenseless.

On November 22nd, a KOL tweeted claiming that SafeTrade only allowed users to deposit funds but not withdraw them, and there have been previous complaints about deposits not being credited to accounts.

Based on the information provided by users and analyzed by the Beosin KYT Anti-Money Laundering platform, the following addresses have been identified:

SafeTrade USDT(TRC20) hot wallet address:

TCZL4E88EQ4eqUNpTpwERcHwA1N6wK1tuC

SafeTrade Mexc USDT(TRC20) deposit address:

TWDVchAir1nUo9cWZqLianGuai3udyQMDrGfCs9o

Beosin KYT trace of fund flow for related addresses

On November 23rd, SafeTrade transferred 1.02 million USDT from its hot wallet address TCZL4E88EQ4eqUNpTpwERcHwA1N6wK1tuC to its Mexc accounts (TEPSrSYPDSQ7yXpMFPq91Fb1QEWpMkRGfn and TB37WWozkkenGVYWD7Do2N5WT2CedqDktJ), and its USDT withdrawal service was temporarily suspended. SafeTrade later resumed USDT withdrawals, with only 38,000 USDT remaining in its hot wallet account, and users are currently attempting to withdraw their funds.

link: https://tronscan.org/#/address/TCZL4E88EQ4eqUNpTpwERcHwA1N6wK1tuC/transfers

Therefore, we recommend that users withdraw their funds as soon as possible to avoid withdrawal failure after the hot wallet funds on SafeTrade are depleted.

How should users guard against the explosion of unlicensed exchanges?

Here are some suggestions to help users be vigilant and protect themselves against fraudulent investment platforms.

1 Be cautious in selecting investment platforms: Be extra cautious when choosing investment platforms. Choose platforms that are regulated and have a good reputation. Conduct thorough research and investigation, check the platform’s registration information, regulatory licenses, and user reviews, among others. It can also be helpful to pay attention to the exchange’s reserve proof.

2 Beware of high return promises: Stay alert when it comes to investment projects that claim to offer exceptionally high returns. If a project promises returns that are too exaggerated or unreasonable, it may involve fraud risks. Reasonable investment returns usually come with corresponding risks.

3 Pay attention to investment risk education: Understand the risks and potential issues of investment and practice appropriate risk management. Do not blindly trust so-called “risk-free” investments. Have the right investment mindset and avoid blindly following trends or making impulsive investments.

4 Confirm platform compliance: Verify whether the investment platform is regulated by relevant regulatory agencies such as securities or financial regulators. Compliant platforms usually disclose relevant information and adhere to regulations and rules.

5 Protect personal information and fund security: When using investment platforms, pay attention to protecting personal information and fund security. Avoid making investment transactions in untrustworthy network environments and ensure the use of secure network connections. Monitor and be cautious of exchange addresses.

6 Monitor and be cautious of exchange addresses: Legitimate exchanges will disclose their hot wallet addresses. Users can employ trusted third-party platforms to monitor and receive real-time alerts regarding wallet addresses. The EagleEye platform launched by Beosin provides real-time alerts and monitoring, and users can set their own monitoring criteria, such as setting alerts when a certain amount is withdrawn from the exchange’s hot wallet.

https://eagleeye.sLianGuaice/

7 Be cautious of investment advice and promotions: Exercise caution when it comes to investment advice and promotions from strangers or unverified sources. Do not be swayed by high-pressure sales tactics or rush into investment decisions. Conduct independent research and judgment, and avoid blindly trusting promises made by others.

8 Report the fraud and seek legal assistance promptly: If you discover that you have been a victim of investment fraud, report it to the police immediately and seek legal assistance. Taking early action can increase the chances of recovering losses.

Stay vigilant, enhance investment knowledge, choose compliant investment platforms, and take appropriate security measures are key to preventing scams from fake investment platforms. Prudent decision-making and risk management are important aspects of the investment process, ensuring the safety of your investments and personal financial security.

In addition, these incidents also call for regulatory agencies and law enforcement authorities to take stricter regulatory measures to ensure the healthy development of the financial market and the protection of investors. Strengthening the monitoring and crackdown on fake investment platforms, increasing the punishment for non-compliant platforms, helps to reduce the frequency of similar scam incidents and protect the interests of investors and market stability.

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