The digital-asset industry in Hong Kong is reeling from a fresh shock — the JPEXsuspended operations amid a liquidity crunch, while the local Securities and Futures Commission (SFC) has launched a wide-ranging investigation. Police have already received thousands of complaints from affected customers, whose total losses exceed $152 million.
The Rise of JPEX
The trading platform was founded in 2020 and is headquartered in Dubai. The company billed itself as a global player, but its focus was on the Asia-Pacific region.
According to the JPEX website, the exchange holds trading licences in Canada, the United States and Australia. On paper, the firm even provided every user with a compensation plan with a maximum limit of $75,000.
Co-founder and CEO of JPEX America is Chihiro Shinzaki, and the head of the Asian division is Sean Nan.
The platform offered standard market services such as spot and derivatives trading, staking, swaps and passive income with an annual yield of around 30%. In addition, JPEX supported operations with non-fungible tokens.
“Investing in stocks is easy” — the cryptocurrency company’s slogan.
The exchange has a native token JPC of the ERC-20 standard: ERC-20. The asset allowed users to save on trading fees, was used in gaming and staking services, and was issued as rewards. It also served as a governance token within the community.
According to CoinMarketCap, in the last week the token fell by 24%, to $0.0228. Its market capitalization stands at $4.57 billion with a daily turnover of $207,000.
According to MyToken, the platform’s daily trading volume is $809,072.
Like many other exchanges, JPEX was aggressively advertised online through trade publications and influencers. The management contracted with the Hong Kong government to build metro stations, commercial buildings and advertising boards.
The End of another Crypto Empire
On the evening of 17 September, JPEX’s leadership posted a blog message about suspending certain operations. The firm cited liquidity issues due to disagreements with an external market maker and “unfair treatment” from regulators.
The platform’s management pledged to return customers’ funds in full and planned a possible restructuring into a decentralized autonomous organisation.
Soon after, Hong Kong police held a briefing, stating 1641 complaints in the JPEX case. All those who contacted authorities were unable to withdraw funds from the platform amounting to around HK$19 billion ($152 million).
Authorities detained eight suspects linked to the alleged fraud. Police froze their accounts totaling $1.9 million and seized assets worth $5.6 million. Names of suspects have not been disclosed.
In the operation “Tiguan” or “Iron Gate,” authorities conducted raids at 20 locations and confiscated cash, jewellery, computers and mobile phones worth $1 million.
Additionally, police arrested crypto-influencer Joseph Lam for his ties to JPEX. Lam had previously written on Instagram that he personally went to the police to give evidence and urged affected users to call the hotline.
The inquiry began after a warning from the SFC about potential risks posed by the trading platform. According to the agency, JPEX “made false or misleading statements on social media,” claiming to have a licence in Hong Kong.
Hard Postscript
During the discussion of the JPEX situation, Elizabeth Wong, the licensing director and head of the fintech division at the SFC, said the regulator had added the company to a list of unregistered and suspicious organisations as early as July 2022.
Wong added that on 7 August 2023 the SFC warned the public about the risks of unlicensed cryptocurrency exchanges, but JPEX “became worse and worse.” In these circumstances the regulator had to issue a public appeal to stop operations and promotion of the platform.
The official noted that after halting activity JPEX imposed withdrawal limits of $1,000 while increasing the fee to $999.
Mak Wai-kwong, acting chief inspector of the Police’s Commercial Crime Unit, said authorities would continue investigations and may arrest new suspects.
Unlike the mainland’s approach to digital assets and mining, Hong Kong remains friendlier to crypto. Previously, Bitcoin exchanges Huobi, OKX and OSL submitted applications to operate in the jurisdiction, while the crypto-bank SEBA has already has received approval.
In April, the Hong Kong High Court recognised digital assets as property, and in the same month the government urged banks to service regulated crypto platforms.
However, given the situation, local authorities are likely to tighten rules for crypto-service providers. Hong Kong Chief Executive John Lee has already issued a call for a closer examination of the industry.
“This incident underscores the importance of using licensed platforms when citizens want to invest in digital assets. The SFC will monitor the situation closely and ensure adequate consumer protection,” he said.
Lee added that the government will step up efforts to educate the public about the risks associated with cryptocurrencies.
Recall: in September, the Hong Kong Monetary Authority warned unlicensed crypto-companies not to describe their services as banking. Regulators view such advertising as misleading.