The number of alleged fraud victims linked to crypto exchange platform JPEX has risen to 2,086, as three more people are arrested.

The case, which involves around HK$1.3 billion in losses, is reportedly Hong Kong’s largest financial fraud case, with some telecom firms now blocking the JPEX website – reportedly upon police request.

Mobile application of the unlicensed cryptocurrency exchange platform JPEX, on September 19, 2023. Photo: Kyle Lam/HKFP.

Three men, aged 25 to 32, were arrested over conspiracy to defraud on Wednesday, bringing the total number of arrests to 11, including two social media influencers – Joseph Lam and Chan Yee. The police told HKFP on Thursday that investigations were still ongoing and more arrests may be made.

The police have asked local telecom operators to block the website of JPEX, local media reported citing sources.

HKFP confirmed that the site cannot be accessed locally via telecom operators including SmarTone, CSL mobile and Three. The police said it would not comment on the operational details of investigations into individual cases, when approached by HKFP.

Official homepage of the unlicensed cryptocurrency exchange platform JPEX, on September 19, 2023. Photo: Kyle Lam/HKFP.

Financial watchdog – the Securities and Futures Commission (SFC) – urged investors to use licensed and regulated cryptocurrency trading platforms at a press conference on Tuesday.

Licensing for virtual asset trading

Hong Kong introduced a new licensing regime for virtual asset trading providers on June 1. However, the SFC said that operators who already had a “meaningful and substantial presence” before that date may enjoy a one-year transition period before applying for a licence – otherwise they must close down.

Coingaroo JPEX crypto
A branch of over-the-counter crypto exchange store Coingaroo is closed on September 19, 2023. Photo: Kyle Lam/HKFP.

JPEX, registered in 2019, had continuously partnered with key opinion leaders and Over-The-Counter (OTC) crypto stores to promote itself as a licensed platform, Elizabeth Wong, director of licensing and head of the fintech unit at the SFC, said at the Tuesday press briefing.

However, the watchdog said that JPEX has not applied for a licence, nor expressed any wish to apply. The SFC issued a statement last Wednesday stating that the authorities were aware that JPEX had been using “suspicious” methods to promote its products through influencers, adding that the platform was unlicensed.

The platform promoted some of its financial products as offering an annual percentage yield of over 20 per cent, but many retail investors found themselves unable to withdraw virtual assets from their JPEX accounts, or had found that their account balance had “been reduced and altered,” according to the watchdog and Ming Pao.

Coiner JPEX crypto
A branch of over-the-counter crypto exchange store Coiner is temporarily closed, on September 19, 2023. Photo: Kyle Lam/HKFP.

Following reports of suspected fraud, police arrested six people on Monday and searched the offices and crypto stores of the two social media influencers.

 Branches of OTC stores Coingaroo and Coiner were also searched.

JPEX issued two statements on Wednesday and Thursday saying that the platform has been “impacted by an event involving SFC.” It said the company has “always hoped to hold rational consultations and communications with the SFC,” but their repeated efforts to seek guidance have often been “dismissed or sidestepped” by SFC.

HKFP has reached out to the SFC for a response.

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Irene Chan is a reporter at Hong Kong Free Press and has an interest in covering political and social change. She previously worked at Initium Media as chief editor for Hong Kong news and was a community organiser at the Society for Community Organisation serving the underprivileged. She has a bachelor’s degree in Journalism from Fudan University and a master’s degree in social work from the Chinese University of Hong Kong.

Irene is the recipient of two Society of Publishers in Asia (SOPA) awards and three honourable mentions for her investigative, feature and video reporting. She also received a Human Rights Press Award for multimedia reporting and an honourable mention for feature writing.