Over the past few months, Dubai-based cryptocurrency trading platform JPEX has been under the scanner of Hong Kong regulators. Last week, the city’s police arrested nearly a dozen suspects in connection with alleged illegal crypto activity related to JPEX, with victims’ losses amounting to nearly $152 million.
Now, media reports are swirling that the masterminds behind the JPEX crypto exchange fraud, which has seen victims’ losses balloon to an alarming $178 million, are still on the run, evading the clutches of the law. As of September 23, Hong Kong Police had reportedly received more than 2,265 complaints related to the unlicensed crypto platform. Victims say they were unable to withdraw their crypto assets after the platform raised its withdrawal fees to 999 Tether.
Hong Kong’s Securities and Futures Commission was the first to bring attention to the alleged JPEX scandal. On September 13, the regulator alerted the public that it had received more than 1,400 complaints alleging fraud against JPEX. According to a police briefing, customer funds worth more than $150 million were stuck with JPEX at the time.
A week later, Hong Kong police has arrested 11 people in connection with the alleged fraud at JPEX, including lawyer-turned-influencer Joseph Lam Chok—who has brushed off any ties to the crypto exchange—Youtubers Chan Wing-yee and Chu Ka-fai and three staff members of the JPEX Technical Support Company. Among other names that have been summoned for questioning are the company’s director, Kwok Ho-lun, a restaurant director and three celebrities who were reportedly found to be endorsing JPEX.
A manhunt to arrest the leaders of JPEX who orchestrated the alleged fraud is still underway, with Hong Kong police enlisting the help of Interpol and other international enforcement agencies. The action came after the police detected suspicious crypto transfers originating from JPEX. Meanwhile, local telecommunications providers have been directed to block access to the exchange’s website.
According to its website, JPEX is headquartered in Dubai and licensed by securities authorities in Australia, Canada and the US. However, Hong Kong’s financial watchdog last week warned that JPEX had been “misleading investors”, falsely claiming that it is a licensed virtual asset trading platform. Notably, the JPEX last week suspended operations, citing “unfair treatment” by Hong Kong authorities, while blaming third-party market makers for “maliciously” freezing funds that it claimed led to a liquidity crisis. In the wake of the JPEX incident, the SFC has decided to reveal the names of all crypto firms seeking a license.
The JPEX case comes nearly four months after Hong Kong started accepting applications for crypto trading platform licenses. While critics say the incident has exposed the vulnerabilities of the city’s open economy, others believe it is a positive sign that signals that “the SFC is prepared to act” against companies that fail to comply with the city’s virtual asset rules.
With the US intensifying its crackdown on crypto firms, Hong Kong, among other regions, is well-positioned to become a global Web3 hub. The year has seen the city cozying up to crypto firms—to the extent that it has been encouraging banks to work with them. But Hong Kong regulators need to be watchful of suspicious crypto trading platforms if they are serious about protecting investors and their hard-earned money.
