Fraud Investigation of Crypto Exchange JPEX Triggers Trading Halt, Arrests, Increased Regulatory Scrutiny

A fraud investigation of cryptocurrency exchange JPEX in Hong Kong has led to the shutdown of some trading activities on the platform, the arrest of multiple people, and increased regulatory scrutiny of the entire crypto sector. “This incident highlights the importance that when investors want to invest in virtual assets, then they must invest on platforms that are licensed,” Hong Kong Chief Executive John Lee stressed.

Crypto Exchange JPEX’s Troubles Continue

Cryptocurrency exchange JPEX announced Monday that it has suspended some trading activities on its platform. This decision comes as the Hong Kong police persist in their investigation of the exchange. The announcement explains that users will be unable to create new orders through the platform’s Earn Trading interface. The exchange claimed that it was “negotiating with … third-party market makers to resolve the liquidity shortage.”

On Tuesday, Hong Kong Chief Executive John Lee said at a news conference:

This incident highlights the importance that when investors want to invest in virtual assets, then they must invest on platforms that are licensed.

Lee emphasized that the Hong Kong Securities and Futures Commission (SFC) “will monitor the situation very closely and ensure that investors are sufficiently protected.” He further noted that the government will step up education to ensure that investors have a better understanding of the risks involved in crypto trading and the regulatory framework governing crypto trading platforms.

Elizabeth Wong, head of the SFC’s fintech unit, said the regulator was investigating whether JPEX had violated the anti-money laundering ordinance, and it had referred the case to the police. The report triggered an investigation by the Commercial Crime Bureau.

The SFC subsequently issued a warning to investors to exercise caution when dealing with JPEX, emphasizing that the exchange had not submitted any license applications. The regulator further alleged that JPEX was making false claims about having obtained authorizations from overseas regulators.

Moreover, the financial regulator emphasized that the trading platform had promoted products with returns on savings that were “too good to be true” and many investors relied on misleading statements from social media influencers who were paid promoters.

According to the Associated Press, the police said Tuesday that they have frozen bank accounts worth 15 million Hong Kong dollars ($1.9 million) and seized three properties valued at 44 million Hong Kong dollars ($5.6 million) related to the exchange. They also revealed that they had received 1,641 complaints about JPEX involving $1.2 billion Hong Kong dollars ($153 million.)

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