September 20, 2023
HONG KONG – Over 1,600 people have come forward to complain that they were not able to withdraw a total of nearly HK$1.2 billion ($153 million) from the unlicensed virtual asset trading platform JPEX, police said Tuesday.
Investigators said in a press conference that four men and four women have also been arrested on suspicion of conspiracy to commit fraud. They included the person-in-charge of the company and the person-in-charge of the over-the-counter exchange shop.
As of 10:30 pm Monday, 1,641 people had reported that they were unable to withdraw assets on JPEX and suspected they had been defrauded, police added.
Police seized HK$8 million in cash, froze the bank balances of approximately HK$15 million from the arrested persons and companies, and three properties with a total value of approximately HK$44 million
Investigators said JPEX basically controlled clients’ assets by requiring customers to provide the private key of the cryptocurrency for safekeeping.The platform also restricts users from withdrawing money in disguise, as the withdrawal limit was set at $1,000, but the handling fee was increased to $999.
Police seized HK$8 million in cash, froze the bank balances of approximately HK$15 million from the arrested persons and their companies, and three properties with a total value of approximately HK$44 million.
Elizabeth Wong Lok-yan, director of licensing and head of fintech unit at Securities and Futures Commission, said in the press conference: “After the Guidelines for Virtual Asset Trading Platform Operators took effect on June 1, if unlicensed virtual asset trading platforms do not have the intention of obtaining a license and continuing to operate, they must end business and promotional services during the transition period. However, JPEX did not stop promotion and intensified illegal sales. Therefore, the SFC issued a warning statement on the 13th of this month.”
As the SFC has not drafted a list to show which virtual asset trading platforms are applying for a license during the one-year transition period, Wong said it may have given a false sense of security to the public that these platforms will be regulated.
Legislative Council member Johnny Ng Kit-chong, who is following the suspected fraud cases reported by JPEX investors, said in a local radio program that the SFC should have taken action and warned the public of the risks earlier.
Ng said that as far as he knows, there are currently more than 100 virtual trading platforms in operation which have not officially obtained a license. “The SFC has set up a one-year transition period, but it has not clearly announced which institutions are applying for licenses,” he said.
Billy Mak Sui-choi, associate professor at Hong Kong Baptist University’s Department of Accountancy, Economics and Finance, noted in the same program that the government should proactively inspect existing virtual trading platforms, collect transaction information to gauge if there are trading risks, and strengthen investment education.