Dubai-based cryptocurrency trading platform JPEX has been at the center of an investigation by Hong Kong police and the city’s financial watchdog over alleged illegal crypto activity. On Monday, Hong Kong police reportedly arrested eight people in connection with cryptocurrency fraud related to JPEX.
As of September 19, Hong Kong police had received 1,641 complaints related to the platform, with customers enraged about not being able to withdraw crypto assets from JPEX. The embattled crypto exchange is holding customer funds worth about 1.19 billion Hong Kong dollars ($152 million), the police said at a press briefing.
Hong Kong authorities conducted searchers in 20 locations across the city as part of their mission called “tieguan” or “iron gate”—and confiscated cash, jewelry, computers and phones. The seized assets were worth about 8 million Hong Kong dollars.
In addition, Hong Kong police have frozen assets worth 15 million Hong Kong dollars lying in the bank accounts of arrested suspects, along with their properties that amount to 44 million Hong Kong dollars. Apart from this, law enforcement officials in Hong Kong also plan to seize alleged criminal proceeds, totaling more than 60 million Hong Kong dollars, according to the press briefing.
Hong Kong police launched an investigation into JPEX after the city’s Securities and Futures Commission warned that the crypto exchange had been “misleading investors” about having applied for a virtual asset trading platform (VATP) license in Hong Kong. “No entity in the JPEX group is licensed by the SFC or has applied to the SFC for a license to operate a VATP in Hong Kong,” the SFC said in a statement last week.”
Notably, the arrests came the same day when JPEX suspended trading, blaming third-party market makers for “maliciously” freezing funds, claiming that it triggered a liquidity shortage. The exchange said users won’t be able to place new orders on its Earn Trading interface, effective September 18, while existing orders on Earn Trading will continue until the product’s maturity.
In sharp contrast to neighboring Chinese mainland’s crackdown on cryptocurrency training and mining, Hong Kong has cozied up to crypto firms this year—and has been pushing banks to play nice with them. In June, Hong Kong’s financial watchdog started accepting applications for licenses from crypto trading platforms. The decision allowed licensed virtual asset providers to cater to retail investors. However, authorities have also warned the public to be wary of cryptocurrency firms falsely describing themselves as “banks”—and their offerings as “deposits.”