Hong Kong’s Largest Investment Fraud Case: 1,641 Victims Lose HK$1.2 Billion

Hong Kong’s financial authorities have uncovered the largest-ever investment fraud case, leaving over 1,600 investors with losses totaling HK$1.19 billion (US$154 million). The scam involves cryptocurrency exchange JPEX and raises concerns about the risks faced by local retail investors in the rapidly growing virtual asset market.

Key Facts

• 1,641 investors have filed complaints as of Monday evening
• The biggest victim lost HK$40 million
• Police arrested eight people in connection with the investigation
• Bank accounts containing HK$15 million were frozen, and three properties valued at HK$44 million were seized

The Fraudulent Scheme

Acting Chief Inspector Mak Wai-kwong of the Hong Kong Commercial Crime Bureau described the case as “astonishing”, involving mostly inexperienced cryptocurrency investors who fell for JPEX’s promises of high yields despite being “too good to be true”. The company spent HK$40 million on advertising in Hong Kong’s busiest hubs and paid US$70,000 to become a platinum sponsor of the Token2049 conference in Singapore.

Regulatory Response

The Securities and Futures Commission (SFC) issued a public warning against JPEX last week, stating that the exchange was an unregulated platform that made false claims about its compliance with local rules. The SFC has ramped up investor education efforts in recent years, issuing nine warnings through its Investor and Financial Education Council since July 2022.

Impact on Web3 Space

The case highlights growing risks in the Web3 space, where event organizers are facing criticism for accepting JPEX as a major sponsor. Brian Tang, founding executive director of the Law, Innovation, Technology and Entrepreneurship Lab at the University of Hong Kong’s Faculty of Law, noted that the need for additional due diligence on potential sponsors from the Web3 sector may be on the minds of event organizers.

Regulatory Clampdown

The regulatory clampdown on JPEX may prove positive for licensed firms, according to Daiwa Capital Markets analysts Steven Nie and Carlton Lai. “It demonstrates that the regulators will take fierce action towards illegal players with no hesitation,” they wrote.

Ongoing Investigation

Police have not ruled out further arrests as their investigation continues, and Superintendent Lee Mo-yin of the Commercial Crime Bureau said that if someone overseas was found to have committed crimes in Hong Kong, the force would extradite them back to the city.