Hong Kong in particular is known for being a frontrunner in the finance industry. Unlike mainland China (which has completely banned cryptocurrency transactions), Hong Kong has welcomed the use of crypto with many organizations beginning to adopt blockchain technology. With that being said, a huge scandal in Hong Kong regarding JPEX has made its way to the spotlight during the past few days.
Those involved in the cryptocurrency space are familiar with volatile price movement and events. To learn the basics of what you should know about crypto before investing, check out the website cryptocurrencyhelp.com, which breaks down the utility, security, and use cases of various digital assets.
JPEX was a cryptocurrency exchange that had its operating headquarters established in Dubai. Starting from June of 2023, The Hong Kong Securities and Futures Commission (SFC) started accepting applications, known as the virtual asset trading platform (VATP) licensing regime, for cryptocurrency exchanges for a proper retail license to operate in Hong Kong.
After officially promoting their services in Hong Kong, JPEX spent millions in HKD on advertising and marketing. However, it was discovered recently that JPEX had been operating in Hong Kong without this proper license. On September 13 the SFC issued a warning, after the SFC has received what is now amounting to over 2000 complaints, the total sum lost by victims exceeds $1.2 billion HKD — equivalent to about $154 million USD. Police have been able to freeze bank accounts and properties belonging to JPEX worth tens of millions in HKD. This could be one of, if not the biggest, fraud causes in Hong Kong ever.
JPEX stated that it had “not yet established a formal office” in Hong Kong. As more and more issues began rising to the surface, JPEX made an emergency attempt to prevent users from withdrawing by increasing their withdrawal fees to approximately 1000 USDT, a hefty sum that many found unreasonable.
The JPEX scandal came as a massive shock to many, but what were some of the warning signs? JPEX had offered abnormally high yearly returns (some being 30%) on stablecoin staking, which has been a common red flag for other malicious projects like Celsius or Terraform Labs in the past. Additionally, the SFC already issued a warning for SFC back in July of 2022
Both influencers and employees that were affiliated with JPEX have been arrested, with allegedly eight people under arrest at this point in time. Not only will the SFC keep a close eye on the situation, but Hong Kong Chief Executive John Lee said the following: “This incident highlights the importance that when investors want to invest in virtual assets, then they must invest on platforms that are licensed.”
It would appear that this incident will not dissuade Hong Kong from continuing to adopt crypto. Lee puts extra emphasis on the fact that Hong Kong residents should only use platforms approved by the SFC, and that investors should never spend funds that they are not willing to lose.
JPEX wants to form a DAO (decentralized autonomous organization) following its shutdown. It announced a reimbursement plan that will award users with dividends in the new DAO, with the exchange claiming that unnamed third-party market makers were behind the platform’s collapse due to freezing funds.
There are more and more regulations being enforced as crypto continues to grow, such as the UK’s online safety bill for the metaverse. With that being said, it’s important to take the necessary steps to protect your funds. This incident just further emphasizes the popular saying: not your keys, not your crypto. It is highly recommended to withdraw your crypto off exchanges, into your personal wallet (preferably cold wallet for extra security) for full custody of your funds.
In light of the JPEX scandal and past events, it’s important to know how to keep funds safe. Here are a few rules to follow:
- Never click random links. Email phishing scams in general are extremely common, and clicking these links can completely drain your wallet’s funds. Even websites that show up as advertisements on Google can be malicious duplicates, so pay close attention and only click on verified links from people you trust.
- Keep your private key and seed phrase safe. It is crucial that you never share your private key or seed phrase with anyone, since this will allow others to directly access your wallet. A common mistake as well is writing down this sensitive information somewhere online (e.g. a document), since your account or devices could be compromised.
- Use a cold wallet. Cold wallets provide an extra layer of security compared to hot wallets, since they are physical USB sticks that need to be inserted into devices to be accessed.
Please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. CryptoMode is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.