The infamous JPEX crypto exchange scandal has set off a storm of fear and panic in Hong Kong. The fallout from the more than $200 million in losses has been so painful—that Hong Kong residents are starting to lose their patience with digital assets altogether.
JPEX crypto scandal triggers a moment of panic in Hong Kong
A survey, conducted by the Hong Kong University of Science and Technology (HKUST) in late September, revealed that 41% of Hong Kong residents do not feel comfortable investing in digital assets. That’s a 12% increase from a similar study conducted in May.
Meanwhile, only 20% of survey participants said they were interested in holding cryptocurrencies in the future—a decline of 5 percentage points from the earlier survey—another sign that Hong Kong’s interest in cryptocurrencies has started to wane. It’s worth mentioning that the survey is expected to conclude on October 20, so the numbers could further north.
The ripple effects of the JPEX scandal
The change in public attitudes towards cryptocurrencies comes on the heels of a high-profile “fraud” scandal linked to the now-shuttered crypto exchange JPEX. According to the numbers provided by the Hong Kong police, the JPEX crypto scandal has impacted more than 2,000 investors, with their losses amounting to nearly $200 million.
Speaking of JPEX, the “alleged financial fraud” at the company found mention in HKUST’s survey—though the university did not name JPEX in its report. The JPEX fraud has triggered a moment of panic in Hong Kong, with investment appetite becoming “more conservative,” according to Professor Allen Huang, associate dean of HKUST’s business school.
“As virtual assets become increasingly a part of the digital economy, more educational initiatives are needed to enhance public understanding and awareness of the risks and potentials of this emerging field.”
Local authorities have accused operators of JPEX exchange of “misleading investors” about having applied for a virtual asset trading license in Hong Kong. While Hong Kong police have arrested more than two dozen suspects in connection to the JPEX fraud, the ringleaders of the operation are still at large.
A surge in phishing attacks also hurting investor appetite for crypto
The survey comes as the cryptocurrency market as a whole continues to be plagued by scams and exploits. Earlier this month, Todayq News reported that phishing attackers stole nearly $450K from Hong Kong Binance users.
Too little, too late
Amid a rise in crypto-related crimes and in the aftermath of the JPEX crypto scandal, the Hong Kong Securities and Futures Commission has issued a stern warning to unlicensed crypto exchanges. The regulator has made it clear that crypto companies found guilty of defrauding investors or misrepresenting their legal status will be subject to strict action.