Crypto exchange JPEX is misleading investors, Hong Kong securities regulator says, warning online promoters
- The Securities and Futures Commission warned of ‘suspicious features’ on JPEX, which it said is misleading investors about being licensed in Hong Kong
- The regulatory body is trying to tighten the reins on crypto platforms after warning in August about exchanges making false claims
The Hong Kong Securities and Futures Commission (SFC) issued a warning on Wednesday against the use of the cryptocurrency exchange JPEX, accusing it of “suspicious features” and promoting misleading information about its licensing.
Online influencers and over-the-counter virtual asset money changers (OTC shops) were making false or misleading statements about JPEX having applied for a virtual asset trading platform (VATP) licence in Hong Kong, the city’s chief financial regulator said in a statement posted to its website.
“No entity in the JPEX group is licensed by the SFC or has applied to the SFC for a license to operate a VATP in Hong Kong,” it said.
The SFC warned investors to “be cautious about investment opportunities that seem too good to be true”, adding that investment advice posted on social media platforms is often done by paid promoters, not investment professionals.
The agency notified relevant influencers, opinion leaders and OTC shops and requested they “cease promoting JPEX and its related services and products”, it said.
JPEX’s website also asserted that the platform is “licensed and recognised” to facilitate the trading of virtual assets with several overseas regulators – another claim the SFC said was “not true”.
In a statement on its website, JPEX responded to the SFC’s claims, saying it still plans to apply for a licence. “We are determined to create an ideal Web 3.0 community and have consistently complied with regulations and licensing systems in different regions,” the company said.
SFC’s warning is part of efforts to rein in unregulated crypto activities in the city. As part of Hong Kong’s push to become a crypto hub, the SFC launched its VATP regulatory regime in June, mandating that exchanges servicing retail customers apply for and receive approval within a one-year grace period.
The Wednesday notice expressed other concerns about JPEX, such as promises of exceptionally high returns, reports of investors facing difficulties withdrawing assets, and false claims that the exchange had partnered with and received investment from a Hong Kong-listed company.
The SFC said local investors should be wary of the risks of unregulated VATPs, which could result in the loss of funds if the platform shuts down, goes bankrupt, is hacked or otherwise misappropriates assets, leaving users with little recourse.
The SFC’s caution comes only weeks after Legislative Council member Duncan Chiu warned that criminals were taking advantage of Hong Kong’s support for crypto to carry out illegal activities and that some investors were publishing exaggerated and misleading advertising content.
The lawmaker said regulators and law enforcement agencies should prevent such activities, and called on the SFC to disclose operators that had no intention of applying for licences or were not licensed so that the public could avoid transacting with problematic platforms.
Under Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance, through which the VATP licensing scheme was implemented as an amendment, virtual asset fraud can lead to a fine of up to HK$10 million (US$1.3 million) and imprisonment for 10 years.
“The SFC will not hesitate to take enforcement action against individuals and entities who fail to abide by the VATP regime administered by the SFC, including those who are involved in such violations,” the SFC said.
