The JPEX Scandal: Hong Kong's Biggest Cryptocurrency Crime

The cryptocurrency exchange JPEX faced scrutiny after the Hong Kong Securities and Futures Commission (SFC) accused it of regulatory violations. This led to financial issues, asset transfers, and other disputes. Hong Kong police are now investigating JPEX for fraud, arresting several influencers promoting it. The case, involving HKD 1.4 billion, has overshadowed the previous HKD 230 million scandal by AAX.

The Fall of JPEX

On 13 September 2023, the SFC issued a "Warning Statement on Unregulated Virtual Asset Trading Platform," singling out JPEX for its aggressive promotion strategies through social media influencers and over-the-counter cryptocurrency exchanges, pointing out that JPEX had been operating without a licence.

Following the SFC's warning, panic ensued. Users reported being unable to withdraw their assets for over 16 hours. When they could, they faced withdrawal limits of a mere 1,000 USDT, with almost 99% of that amount taken as fees. The value of JPEX's native token, JPC, plummeted, only to surge by 35% within 10 minutes.

By 16 September, the police were involved, suspecting JPEX of fraud. Two days later, police arrested several influencers, including Jo Lam and Chan Yee, who had been actively promoting JPEX on social media. Between September 26 and 28, Hong Kong and Macau authorities seized approximately HKD 24 million and arrested four more suspects, bringing the total number of arrests to 18.

A Lesson in Greed and Oversight

According to blockchain transaction records from Arkham Intelligence, from 13 September onwards, JPEX saw an inflow of USD 180 million. However, 90.6% of this value came from their volatile JPC token, suggesting an inflation of their wallet balance. Excluding the JPC value, JPEX's wallet had a net outflow of USD 11.37 million.

Hong Kong's Chief Executive Lee Ka-chiu expressed deep concern, emphasizing the importance of regulation and investor education. Since its inception in 2021, JPEX's marketing had been omnipresent — including large advertisements in Hong Kong's subway stations. The SFC had already flagged JPEX in 2022 among "unlicensed companies and suspicious websites." Despite warnings, JPEX continued its operations. The case serves as a stark warning: in an unregulated space, due diligence and regulatory compliance are non-negotiable.