Hong Kong’s Securities and Futures Commission blacklists, blocks access to 2 cryptocurrency websites suspected of scamming investors
- Websites HongKongDAO and BitCuped placed on alert list after they were suspected of spreading false information, SFC says
- HongKongDAO sold a digital token named ‘HKD’ and falsely claimed to have applied for operating licences
Hong Kong’s securities watchdog has blacklisted and blocked access to two cryptocurrency websites suspected of scamming investors using false claims, after it was recently accused of acting too slowly in alerting victims who allegedly lost more than HK$1.6 billion through two fraudulent platforms.
Securities and Futures Commission (SFC) director of enforcement Damon Cheng Tak-ka on Wednesday said the two websites – HongKongDAO and BitCuped – were placed on its alert list after they were suspected of spreading false information about themselves and their business.
The SFC, which received a tip-off from a source, found HongKongDAO had sold a digital token named “HKD” and claimed to have applied for operating licences with the commission and the government.
Cheng said the website’s claims were false and that the SFC had placed it on its alert list on November 24.
“Through the help of police, the SFC asked internet service providers to block the website and also issued a cease and desist letter to trading platforms to stop trading tokens issued by HongKongDAO,” he said.
The watchdog found that HongKongDAO operated two chat groups, one in Chinese with more than 10,000 members and the other in English with over 1,700 people, and had touted the HKD token as having a high market value to attract investors.
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“Once you press the ‘buy’ button on the website, it will divert people to another site for payment,” Cheng said.
The other website, BitCuped, was found to have falsely listed the chairman and CEO of bourse operator Hong Kong Exchanges and Clearing (HKEX) as its own.
“BitCuped claims on its website that ‘Laura Cha’ and ‘Nicolas Aguzin’ served as its chairman and chief executive officer respectively, when in fact neither of them has any affiliations with it,” Cheng said. Cha is HKEX chair while Aguzin is CEO.
The website claimed to provide trading services in virtual assets and stocks and was placed on the blacklist on November 10.
Lawmaker Johnny Ng Kit-chong expressed concern that a new trend could develop of scammers falsely using the names of well-known individuals to lure and deceive investors.
“Foreign investors may fall into the fake ‘celebrities endorsement’ trap after seeing some big names in the industry and think the platform is legitimate,” Ng said.
The watchdog did not reveal the number of victims or the amount of monetary loss related to the two sites as a police investigation was under way.
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Keith Choy Chung-fai, the SFC’s interim head of intermediaries, warned the public to be wary of befriending strangers online.
“Scammers use online platforms such as Facebook, WeChat, WhatsApp, Telegram and Tinder and pretend to be investment gurus or good-looking people to befriend victims and lure them to join these chats or sign up for classes,” he said.
“These proclaimed investment tips or insider trading information are not so readily available, do not trust them, do not give out your personal information or believe those unreasonable returns.”
The SFC’s move follows a case in late November in which 164 residents claimed to have lost about HK$159 million (US$20.4 million) after being asked to invest in cryptocurrency platform Hounax.
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The watchdog said at the time it did not have the power to halt Hounax’s operation earlier, as the platform was unregulated and not licensed by the SFC.
A source said ceasing Hounax’s operations required more than just blocking access to its website. It involved power to stop money transactions and the need to coordinate with police operations. But he added that the SFC had a cooperation mechanism with police to quickly block sites deemed suspicious at an early stage.
A police spokesman on Wednesday said the force had received a referral on the two latest cases from the SFC on November 29 and its commercial crime bureau was following up.
No requests for help had been received so far, a police source said.
Another scandal erupted in September centred on the JPEX cryptocurrency exchange. It formed the single largest financial fraud case in the city’s history, with 2,629 alleged victims and more than HK$1.61 billion in losses, exposing flaws in the regulatory regime amid a push to transform Hong Kong into a virtual asset hub.
The watchdog was criticised for failing to name JPEX in its initial warnings about the platform’s suspicious operation.
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Lawmaker Doreen Kong Yuk-foon said she believed the SFC was able to block access to two suspicious websites promptly this time not just because of the false claims, but also because of lessons learned from previous mistakes.
“The SFC has always been capable of liaising with police and the Office of the Communications Authority to cease operations of sketchy websites and platforms. I applaud its prompt action, which meets the public’s expectations,” Kong said.
“No one wants to see the same drama as Hounax and JPEX again.”
Chief Executive John Lee Ka-chiu earlier said his administration would review the relevant legislation and look into giving more powers to regulators if needed after lawmakers slammed the SFC over its handling of the fraud cases and called for the government to close legal loopholes.
But Choy stopped short of revealing whether any progress was made.
“I can only say we are using all our power to conduct investigation and enforcement actions. We are also working very closely with police in combating fraud cases.”
Police recorded a 52.5 per cent surge in the number of scams in the first nine months of the year compared with the same period in 2022, rising from 19,444 to 29,650.
The amount of money lost to scams was HK$4.99 billion, a 47.6 per cent year-on-year increase.
Online investment scams were responsible for HK$2.13 billion in losses – 42.7 per cent of the total amount of money swindled, the most out of all types of fraud.
