Hong Kong’s financial watchdog has said it will reveal the names of cryptocurrency exchanges that have applied for trading licences after meeting criticism from the industry and lawmakers over its handling of an alleged large-scale crypto fraud.

The Securities and Futures Commission (SFC) said in a press conference on Monday that it would publish lists of licensed virtual assets trading platforms (VATPs) , those applying for licences, and defunct ones. It would also issue a list of ” suspicious VATPs” on its website.

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

Only two exchanges – OSL and Hash Blockchains – have been granted licences so far.

HKBitEx, Hong Kong BGE, HKVAX and Victory have all applied for licences, although the SFC said the public should be aware that they were yet to be licensed.

Authorities initiated action against JPEX, an unlicensed crypto exchange platform that often engaged influencers to promote it, last Monday. Eleven people have been arrested so far, with the case ballooning to involve HK$1.49 billion in losses, police said on Monday.

Police have received at least 2,360 reports related to the case.

The SFC said during a joint press briefing with the police last Tuesday that it would not reveal the names of platforms that had applied for licensing, saying it was “not very appropriate.”

The watchdog also said it had issued a number of statements warning unnamed VATPs against “engaging in improper practices.”

The first SFC statement naming JPEX was issued on September 13, calling the platform unlicensed and saying that authorities had observed JPEX using “suspicious” methods to actively promoting its products through influencers.

JPEX police crypto scam fraud
Hong Kong police exhibit evidence collected from 20 locations related to an investigation into crypto exchange JPEX, on September 19, 2023. Photo: Kyle Lam/HKFP.

Hong Kong introduced a new licensing regime for virtual asset trading providers on June 1, giving platforms with a “meaningful and substantial presence” before that date a one-year transition period to apply for licensing or close down.

Johnny Ng, a businessman and a lawmaker, said on Metro Radio last Saturday that it was too late for the watchdog to issue a statement in the middle of September. He said more investors “could have been saved” if SFC had alerted them earlier.

Jeffery Lam, a lawmaker and a member for executive council, said the incident reflected the government’s deficiency in regulating virtual asset platform and in educating investors.

Emil Chan, co-chair for the Hong Kong Digital Finance Association, said on RTHK on last Saturday that SFC did not fulfil its responsibility to protect investors.

SFC said on Monday that it would do more to educate investors and the public on virtual assets.

Influencer-backed platform

Before authorities launched their investigation, JPEX had actively promoted its products through influencers and stars, including Joseph Lam – an insurance agent and a former barrister, financial Youtuber Chan Yee, and actors Julian Cheung and Jacquelin Ch’ng.

Lam and Chan was among the 11 people arrested by police over conspiracy to defraud, while Cheung and Ch’ng were questioned by police.

Joseph Lam JPEX
Influencer and insurance agent Joseph Lam (right) holding a press conference in respondense to the JPEX crypto ‘fraud’ on September 22, 2023. Photo: Kyle Lam/HKFP.

Lam held a press conference with a lawyer at his home in Mid-Levels last Friday afternoon after being granted bail last Tuesday. He told reporters that he had closed his company and terminated the rental contract for his office, but refused to disclose any details about the JPEX investigation.

Aside from influencers and stars, JPEX also worked with many over-the-counter crypto stores to attract investors. Police also searched branches of over-the-counter stores Coingaroo and Coiner last Monday.

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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.