Hong Kong’s crypto-friendly image tested as JPEX faces fraud probe

Category: Asia Crypto Hong Kong’s crypto-friendly image tested as JPEX faces fraud probe

Hong Kong’s law enforcement is currently probing a case of alleged fraud related to JPEX. This is leading to arrests of a number of JPEX staff in relation to regulatory accusations of deceptive practices.

Cryptocurrency firm JPEX, or Japan Exchange, made waves in Hong Kong last year with its teal-and-white advertising campaigns. The company’s ambitious slogan, “investment: more than just stocks,” dominated the Hong Kong’s financial district. However, the glory days are long gone.

JPEX’s meteoric rise and sudden fall

Hong Kong has been striving to maintain financial integrity for its crypto sector. Although it once hosted major crypto players like FTX and Crypto.com, the territory introduced a new licensing system in June this year to allow retail trading, aiming to secure its position as a digital asset trading hub. Yet, JPEX’s scandal has raised questions about the effectiveness of Hong Kong’s regulatory framework in the crypto space.

Carlton Lai, head of blockchain research at Daiwa Capital Markets, commented, “The regulators may find that they should have taken action against unlicensed entities from day one of the new licensing regime. It’s now up to regulators to prove their new system protects investors on licensed platforms.”

JPEX’s market impact

Hong Kong police detained at least 11 individuals, including JPEX employees, crypto store staff and online influencers, on suspicions of conspiracy to commit fraud tied to an unlicensed crypto exchange. An incredible 2,300 complaints were filed against JPEX, with reported losses reaching up to HK$1.4 billion (US$179 million). Allegations against JPEX encompass misleading investors by falsely claiming to have applied for a crypto trading licence and imposing exorbitant withdrawal fees.

The authorities have frozen assets exceeding HK$60 million, including HK$44 million in real estate, linked to the case. Before this complex scam was reported, the Securities and Futures Commission had already flagged JPEX as a company that had been targeting Hong Kong investors without a licence since July the previous year.? The SEC continually cautioned investors about unlicensed platforms.

Regulatory and market repercussions

JPEX has strongly denied the allegations, stating that the Securities and Futures Commission made accusations without proper investigation or review. The price of JPEX’s in-house cryptocurrency, JPC, has plummeted by 67 percent within a week.

While lawmakers argue that the JPEX case showcases Hong Kong’s ability to take action against non-compliant entities, the scandal might lead to increased scrutiny of crypto trading licence applications, potentially slowing down the licensing process.

JPEX’s aggressive marketing strategies and collaborations with local influencers had given it an outsized presence in Hong Kong. However, the incident has left many investors confused due to the lack of clarity surrounding licensed entities in Hong Kong’s crypto sector.

Complex operation with connections infiltrating all levels of society

This story is shrouded by intrigue and speculation as the masterminds of the scandal remain hidden in the shadows. While local authorities have questioned 11 individuals so far, there are hints that these individuals may be mere pawns in a larger, enigmatic plot, keeping the city on edge.

Rather than the usual suspects, investigators find themselves entangled in a complex game of cat and mouse, attempting to unravel just how much these individuals truly understood about the inner workings of JPEX prior to the scandal’s eruption. Adding a layer of complexity are alleged connections with? over-the-counter virtual asset money changers.

A diverse group of characters has been thrust into the spotlight under suspicion to defraud. Among them is Joseph Lam Chok, a multifaceted professional specialising in law and insurance and a social media influencer. Lam, who once had ties to JPEX, is now disentangling himself from the platform’s web, claiming to have severed all connections.

But the cast of characters involved allegedly does not end here.? YouTubers Chan Wing-yee, 36, and Chu Ka-fai, 31, have also been linked to the JPEX scandal. Singer Julian Cheung Chi-lam (left, photo above), and Malaysian actress Jacqueline Ch’ng Se Min (right, photo above), are also being interrogated by the authorities for lending their star power to JPEX promotional videos, adding a touch of glamour to the already star-studded endorsements. Feng Shui master and TV host Clement Chan Ting-bong, who had previously endorsed JPEX, is also being questioned.

As the investigation unfolds, an international subplot emerges. A company registered in Australia under the name “JP-EX Crypto Asset Platform Pty Ltd” surprisingly applied for voluntary deregistration with the Australian Securities and Investments Commission. This took place just one day after Hong Kong authorities arrested the initial eight individuals connected to the JPEX case. However this obscure Australian company, founded in 2020, reportedly held assets valued at less than A$1,000 (US$647).

With the police hinting at the possibility of additional arrests assisted by Interpol, the true story of this crypto platform is far from over.

Looking ahead

The ongoing JPEX case demonstrates the challenges and potential pitfalls of the crypto industry as regulatory regimes evolve and the industry mature. To address the confusion and provide more transparency, the Securities and Futures Commission announced plans to release a list of companies that have applied for crypto trading licences in Hong Kong, despite previous reservations about doing this.

 

Related topics:

AIBC Forex: Chamath Palihapitiya’s SPAC empire crumbles

From Facebook to Instacart (www.arciconfraternitadisantamonica.com)

David Vella’s tech start up makes debut on NASDAQ Tower (www.arciconfraternitadisantamonica.com)

Saudi Arabia exceeds fintech targets (www.arciconfraternitadisantamonica.com)

Valletta, Malta event

Location

Valletta, Malta

11 - 14 November 2024

REGISTER FOR EVENT
',a='';t=t.replace('alt=""','alt="'+alt+'"');return t.replace("ID",e)+a}function lazyLoadYoutubeIframe(){var e=document.createElement("iframe"),t="ID?autoplay=1";t+=0===this.parentNode.dataset.query.length?'':'&'+this.parentNode.dataset.query;e.setAttribute("src",t.replace("ID",this.parentNode.dataset.src)),e.setAttribute("frameborder","0"),e.setAttribute("allowfullscreen","1"),e.setAttribute("allow", "accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture"),this.parentNode.parentNode.replaceChild(e,this.parentNode)}document.addEventListener("DOMContentLoaded",function(){var e,t,p,a=document.getElementsByClassName("rll-youtube-player");for(t=0;t