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The digital asset industry in Hong Kong is experiencing a new shock — the JPEX exchange has suspended operations amid a liquidity crisis, and the local Securities and Futures Commission (SFC) has initiated a large-scale investigation. The police have already received thousands of complaints from affected customers, whose total damage exceeded $152 million.
Becoming a JPEX
The trading platform was founded in 2020 and is headquartered in Dubai. The company positioned itself as a global player, but the main focus was on the Asia-Pacific region.
According to the JPEX website, the exchange has trading licenses in Canada, the United States, and Australia. On paper, the firm even provided each user with a compensation insurance plan with a maximum limit of $75,000.
The co-founder and CEO of JPEX America is Chihiro Shinzaki, and the head of the Asian division is Sean Nan.
The platform offered standard services for the market such as spot and derivatives trading, staking, swaps and passive earnings with an annual yield of 30%. In addition, JPEX supported operations with non-exchangeable tokens.
The exchange has a native JPC coin of the ERC-20 standard. The asset allowed you to save on trading commission, was used in gaming and staking services, and was also awarded as rewards. In addition, it served as a management token in the community.
According to CoinMarketCap, over the past week, the coin has fallen by 24%, to $0.0228. Its capitalization is $4.57 billion with a daily turnover of $207,000.
According to MyToken, the daily trading volume of the platform itself is $809,072.
Like many other exchanges, JPEX was actively advertised on the Internet through thematic publications and influencers. The company's management signed contracts with the Hong Kong Government for the construction of metro stations, commercial buildings and advertising stands.
The End of Another Crypto Empire
On the evening of September 17, JPEX management published a blog post about the suspension of some operations. The company cited problems with liquidity due to disagreements with a third-party market maker and" unfair treatment " by regulators.
The management of the platform guaranteed a full refund for users and planned a possible restructuring into a decentralized autonomous organization.
Hong Kong police soon held a briefing, announcing 1,641 complaints about the JPEX case. All applicants were unable to withdraw funds from the platform totaling about HK $ 19 billion ($152 million).
Authorities have arrested eight suspects involved in the alleged fraud. Law enforcement officers have already blocked their accounts for a total of $1.9 million and seized property for $5.6 million. The names of the suspects have not yet been released.
During Operation Tiguan or Iron Gate, security forces raided 20 locations and confiscated $1 million worth of cash, jewelry, computers and phones.
In addition, the police arrested crypto influencer Joseph Lam for his links to JPEX. Earlier, Lam wrote on Instagram that he personally went to the police to give evidence and urged affected users to call the hotline.
The investigation began after the SFC warned about possible risks from the trading platform. According to the agency, JPEX "made false or misleading statements on social media", claiming to have a license in Hong Kong.
Hard post-measures
During the discussion of the situation with JPEX, the director of licensing and head of the SFC's financial technology department, Elizabeth Wong, said that the agency added the company to the list of unregistered and suspicious organizations back in July 2022.
Wang added that on August 7, 2023, the SFC warned the public about the risks of unlicensed cryptocurrency exchanges, but the JPEX was "getting worse and worse." Against this background, the regulator had to send a public appeal to the platform with a demand to stop operations and promotion of the platform.
The official noted that after the termination of operations, JPEX set withdrawal limits of $1,000, while increasing the commission to $999.
Mak Wai-kwong, Acting Chief Inspector of the Commercial Crime Police Department, said authorities are continuing to investigate and may arrest new suspects.
In contrast to mainland China's crackdown on digital assets and mining, Hong Kong has adopted a more cryptocurrency-friendly strategy. Earlier, the application for registration in the jurisdiction was submitted by the bitcoin exchanges Huobi, OKX and OSL, and the crypto bank SEBA has already received approval.
In April, the Hong Kong High Court recognized digital assets as property, and in the same month, the government called on banks to serve regulated cryptocurrency platforms.
However, given the current situation, local authorities are likely to be forced to tighten legal requirements for crypto service providers. The head of the Hong Kong administration, John Lee, has already issued an appeal, stating the need for a more thorough study of the industry.
Lee added that the government will strengthen measures to inform the public about the possible risks associated with cryptocurrencies.
Recall that in September, the Hong Kong Monetary Authority warned unlicensed crypto companies against describing their services as banking. The regulator regards such advertising as misleading customers.
Becoming a JPEX
The trading platform was founded in 2020 and is headquartered in Dubai. The company positioned itself as a global player, but the main focus was on the Asia-Pacific region.
According to the JPEX website, the exchange has trading licenses in Canada, the United States, and Australia. On paper, the firm even provided each user with a compensation insurance plan with a maximum limit of $75,000.
The co-founder and CEO of JPEX America is Chihiro Shinzaki, and the head of the Asian division is Sean Nan.
The platform offered standard services for the market such as spot and derivatives trading, staking, swaps and passive earnings with an annual yield of 30%. In addition, JPEX supported operations with non-exchangeable tokens.
The exchange has a native JPC coin of the ERC-20 standard. The asset allowed you to save on trading commission, was used in gaming and staking services, and was also awarded as rewards. In addition, it served as a management token in the community.
According to CoinMarketCap, over the past week, the coin has fallen by 24%, to $0.0228. Its capitalization is $4.57 billion with a daily turnover of $207,000.
According to MyToken, the daily trading volume of the platform itself is $809,072.
Like many other exchanges, JPEX was actively advertised on the Internet through thematic publications and influencers. The company's management signed contracts with the Hong Kong Government for the construction of metro stations, commercial buildings and advertising stands.
The End of Another Crypto Empire
On the evening of September 17, JPEX management published a blog post about the suspension of some operations. The company cited problems with liquidity due to disagreements with a third-party market maker and" unfair treatment " by regulators.
The management of the platform guaranteed a full refund for users and planned a possible restructuring into a decentralized autonomous organization.
Hong Kong police soon held a briefing, announcing 1,641 complaints about the JPEX case. All applicants were unable to withdraw funds from the platform totaling about HK $ 19 billion ($152 million).
Authorities have arrested eight suspects involved in the alleged fraud. Law enforcement officers have already blocked their accounts for a total of $1.9 million and seized property for $5.6 million. The names of the suspects have not yet been released.
During Operation Tiguan or Iron Gate, security forces raided 20 locations and confiscated $1 million worth of cash, jewelry, computers and phones.
In addition, the police arrested crypto influencer Joseph Lam for his links to JPEX. Earlier, Lam wrote on Instagram that he personally went to the police to give evidence and urged affected users to call the hotline.
The investigation began after the SFC warned about possible risks from the trading platform. According to the agency, JPEX "made false or misleading statements on social media", claiming to have a license in Hong Kong.
Hard post-measures
During the discussion of the situation with JPEX, the director of licensing and head of the SFC's financial technology department, Elizabeth Wong, said that the agency added the company to the list of unregistered and suspicious organizations back in July 2022.
Wang added that on August 7, 2023, the SFC warned the public about the risks of unlicensed cryptocurrency exchanges, but the JPEX was "getting worse and worse." Against this background, the regulator had to send a public appeal to the platform with a demand to stop operations and promotion of the platform.
The official noted that after the termination of operations, JPEX set withdrawal limits of $1,000, while increasing the commission to $999.
Mak Wai-kwong, Acting Chief Inspector of the Commercial Crime Police Department, said authorities are continuing to investigate and may arrest new suspects.
In contrast to mainland China's crackdown on digital assets and mining, Hong Kong has adopted a more cryptocurrency-friendly strategy. Earlier, the application for registration in the jurisdiction was submitted by the bitcoin exchanges Huobi, OKX and OSL, and the crypto bank SEBA has already received approval.
In April, the Hong Kong High Court recognized digital assets as property, and in the same month, the government called on banks to serve regulated cryptocurrency platforms.
However, given the current situation, local authorities are likely to be forced to tighten legal requirements for crypto service providers. The head of the Hong Kong administration, John Lee, has already issued an appeal, stating the need for a more thorough study of the industry.
Lee added that the government will strengthen measures to inform the public about the possible risks associated with cryptocurrencies.
Recall that in September, the Hong Kong Monetary Authority warned unlicensed crypto companies against describing their services as banking. The regulator regards such advertising as misleading customers.
