1,600 Complaints About Alleged JPEX Fraud Totaling $152 Million Are Filed With Hong Kong Police

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Last Updated on September 19, 2023 by Bitfinsider

During a news announcement today, Hong Kong police announced that they had detained eight individuals on suspicion of conspiring to defraud the cryptocurrency exchange JPEX.

1,641 complaints about the JPEX case, alleging that the parties neglected to remove their holdings from the exchange, had been filed with the police as of Monday night local time. The police stated that the assets involved, as per the complaints, were around HK$1.19 billion ($152 million).

In a police operation known as “tieguan,” or “iron gate,” officials searched 20 locations throughout the city and took approximately HK$8 million worth of cash, jewellery, computers, and phones.

As to the briefing, the police froze around HK$15 million from the accused defendants’ bank accounts and HK$44 million worth of their assets. The authorities are also thinking about seizing alleged criminal gains worth more than HK$60 million.

After the Securities and Futures Commission issued a warning last week about cryptocurrency influencers and the trading platform making “false or misleading statements on social media” to imply that JPEX has filed for a virtual asset trading licence in Hong Kong, the police launched an investigation into the company.

JPEX stated on Monday that it was treated “unfairly” by the government in reaction to the police action.

“When other cryptocurrency exchanges announced their entry into the Hong Kong market and began extensive promotion, JPEX was subjected to continuous unfair treatment,” the exchange stated. “The SFC sent letters to all our partners, requesting the cessation of cooperation with the platform. On September 13, 2023, the SFC issued a statement against the JPEX cryptocurrency trading platform, causing third-party market makers partnered with the platform to maliciously freeze funds, leading to operational difficulties.”

Elizabeth Wong, Director of Licencing and Head of Fintech Unit, Intermediaries of the SFC, stated in a briefing that JPEX has been identified by the agency since July 2022 as an unregistered company and questionable website.

Wong stated that any trading platforms that have no intention of applying for a licence must stop operating in Hong Kong after the city’s regulations governing cryptocurrency retail trading went into effect in June of this year. JPEX did not, however, submit an application for a licence or cease operations.

Wang continued, saying that although the SFC had alerted the public on August 7 about the dangers of illegal cryptocurrency exchanges, “JPEX went from bad to worse.” As a result, on September 13, the SFC publicly identified the exchange and requested that over-the-counter money exchanges and cryptocurrency influencers cease endorsing JPEX.

At the briefing, Vivian Lee, a superintendent of police in the commercial crime division of the Hong Kong Police, stated that the SFC had submitted the issue to the police last Thursday and that since then, the police had been receiving complaints regarding the failure to remove assets from JPEX.

Lee went on to say that JPEX’s token, JPC, has little liquidity because it cannot be traded on other significant exchanges. According to Lee, the exchange even raised the transaction charge to 999 USDT, thus limiting withdrawals, provided that JPEX has a 1,000 USDT withdrawal cap.

The police are still conducting the investigation and may detain more people, according to Mak Wai-kwong, an acting head inspector of the agency that handles commercial crime.

Hong Kong’s Goal for Web3

In contrast to the more general crackdown on cryptocurrency mining and trade on the Chinese mainland, Hong Kong has welcomed cryptocurrency companies this year, even pushing banks to collaborate with them. To bolster its standing as a major international financial hub, Hong Kong authorities issued a number of policy pronouncements about cryptocurrencies in October 2022.

With the official launch of its crypto retail trading licencing scheme in June, Hong Kong now permits licenced exchanges to provide retail trading services. Nevertheless, the SFC has only issued a comparatively modest number of licences thus far.

One of the exchanges that has been granted a retail trading licence is HashKey. Livio Weng, the chief operating officer of HashKey, said The Block today that the SFC has released guidelines for cryptocurrency exchanges that span more than 100 pages and cover a wide range of topics, including safeguarding customer cash.

“Whenever feasible, we encourage the general public in Hong Kong to pick financial institutions that are licenced for their investment activities. This can efficiently protect the security of their assets, particularly for novices with no prior expertise with cryptocurrency investments, according to Weng.

“From an industry perspective, the most urgent task at hand is to expedite the licensing process, innovate mechanisms and empower licensed exchanges with competitiveness. This will help prevent the proliferation of subpar entities in the market and restore a healthy market order,” Wang added.

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