Hong Kong Authorities Investigating Crypto Trading Platform

In a year that has been rife with crypto scandals, scams, and other high-profile headlines, it should not come as a surprise that authorities are investigating yet another cryptocurrency exchange’s practices. Earlier this week it was announced that 11 individuals were arrested by Hong Kong authorities on allegations of fraud.

Making this particular case a little bit different from other scandals is that of the 11 people arrested, a few of them were social media influencers who were paid for promoting the exchange, known as JPEX.

A Scandal Worth Over $150 Million

The investigation being led by Hong Kong’s Securities and Futures Commission, or SFC, alleges that the Dubai-based JPEX has been operating in Hong Kong without the proper licenses. Unlike some other countries, Hong Kong does have a defined process relating to applying for a license to host digital asset trading.

JPEX refutes the claims that it intentionally operated without a license and has countered by saying that their efforts to seek out a license were “dismissed or sidestepped with official rhetoric.” Of the more than 2,000 people who have complained, a majority of them take issue with being lured in by digital cryptocurrency assets that were supposed to produce high yields. As we have seen time and time again, these promised high yields never came to be and many investors were left reeling, having lost sometimes substantial sums of money.

The allure of disproportionately high yields is nothing new, as scams like these exist all over the world all of the time. What is being called into question in JPEX’s case is the role influencers played in duping unsavvy investors into spending money on what they thought was a “sure thing.” One such influencer, Joseph Lam, was shown being led away by police this week. Mr. Lam is a Youtuber with hundreds of thousands of subscribers who regularly touts how cryptocurrency investing has changed his life for the better. While this may not be unscrupulous behavior when taken at face value, there are now hundreds of claims that Lam and people like him tricked investors into thinking getting rich from cryptocurrency investing was not only easy, but guaranteed.

What’s Next for JPEX?

The fate of JPEX, like so many other cryptocurrency exchanges in similar legal troubles, is up in the air at this point. Hong Kong authorities seem to have blocked access to JPEX’s website for those located within Hong Kong, but trading activities are reportedly still taking place.

Customers have begun complaining about not receiving their withdrawn funds in a timely manner, but JPEX has acknowledged this and claims that it is actively working to resolve a liquidity shortage. At first glance this story seems like another instance of a shady trading platform stealing investor money, but when you look more closely there may be more to the story. After all, JPEX did not immediately cease operations like we have seen so many times. Instead, they are working to pay customers back and ultimately fight to disprove the allegations Hong Kong authorities have weighed against them.

Adding more credence to the belief that maybe JPEX is not an unscrupulous actor is the timing of this whole story. Hong Kong authorities are acting in September of 2023 to a law that was not enacted until this past June, barely three months ago. If JPEX were applying for licensure to operate a crypto trading platform in Hong Kong and it is taking Hong Kong authorities ages to reply to that license application, the tone of this case may be very different.