(From left to right) Cheng Tak-ka, Director of Enforcement, Securities and Futures Commission; Wong Lok-yan, Director of Licensing and Head of Fintech unit, Securities and Futures Commission; Kung Hing-fun, Senior Superintendent, Commercial Crime Bureau; Lee Mo-yin, Superintendent, Commercial Crime Bureau; and Mak Wai-kwong, Acting Chief Inspector, Commercial Crime Bureau; hold a press conference about the investigation into the about unlicensed virtual asset trading platform JPEX at Hong Kong Police Headquarters in Wan Chai on Sept 19, 2023. (CALVIN NG / CHINA DAILY)

The Securities and Futures Commission (SFC) on Wednesday expressed deep regret over the disclosure of confidential communications between the regulatory body and JPEX by the virtual asset trading platform. 

According to a statement issued on the SFC’s website, the regulatory body said JPEX has been on its radar since March 2022 when enquiries were made into its suspected false and misleading representations and unlicensed activities.

The SFC's attempts to obtain a response from JPEX were met with “uncooperative” behavior, leading to the inclusion of JPEX on the SFC’s Alert List in July 2022.

Following the public exposure of issues concerning JPEX, numerous platform users said they encountered difficulties in withdrawing their funds, and some reported reductions in their wallet balances

The SFC confirmed that JPEX had never contacted them for a license application, and no entity under JPEX is licensed by the regulator or has applied for a license to operate a virtual asset trading platform in Hong Kong. There has been no communication between the SFC and JPEX regarding licensing matters.

The JPEX issue came into the spotlight on Sept 13 when the SFC notified the public that it had received over 1,000 complaints about the unregistered crypto exchange platform, with claims of losses amounting to over HK$1 billion ($128 million).

ALSO READ: JPEX case: Police get over 1,600 complaints involving $153m

The police arrested three more men on Wednesday, bringing the total number of people arrested in connection with the case to 11. A police investigation is ongoing, and more arrests are possible. So far, 2,086 reports involving an estimated HK$1.3 billion have been received from victims by the police.

Following the public exposure of issues concerning JPEX, numerous platform users said they encountered difficulties in withdrawing their funds, and some reported reductions in their wallet balances. In response to warnings from the Hong Kong watchdog, it was reported that JPEX raised its withdrawal fee to $1,000 in an attempt to dissuade users from withdrawing their assets.

ALSO READ: JPEX incident: CE says HK govt to protect virtual asset investors

“Market turbulence is not uncommon globally. The virtual currency trading industry, with over a decade of history, has seen enticing and deceptive practices due to the lack of regulations. These include high-yield schemes, false advertising, and market manipulation. In unfavorable market conditions, the risks behind such activities become more apparent,” said Livio Weng, chief operating officer of HashKey Group, a Web3 infrastructure developer and virtual asset group based in Hong Kong.

“We urge the public to choose licensed financial institutions for investments, prioritizing asset security. It is essential to have a cautious investment mindset and avoid falling for unrealistic promises. Expediting the licensing process and enhancing competitiveness in licensed exchanges is crucial to restore a healthy market environment,” Weng added.

ALSO READ: JPEX halts trading amid police fraud investigation

According to the information provided on its website, JPEX, established in 2020, presents itself as a "global Crypto Asset Platform". The company claims to hold financial licenses from the US, Canada, and Australia, with operational headquarters in Dubai and plans for a research and development headquarters in Sydney.

The company invested HK$40 million in advertising campaigns, which included placements in MTR stations, on buses and on billboards throughout the city.

zhoujianxin@chinadailyhk.com