Hong Kong SFC Warns of Criminal Liability for Unregistered JPEX Cryptocurrency Exchange

By 0xGorki 09/13/23 1:11 PM

Hong Kong’s Securities and Futures Commission (SFC) has issued a stern warning regarding the activities of the cryptocurrency exchange known as JPEX. The SFC has raised concerns about JPEX’s lack of registration and its aggressive marketing to the Hong Kong public. Additionally, the commission has pointed out the exceptionally high earnings promised by JPEX, which it suspects to be extremely risky for investors.

JPEX, operating through its website jp-ex.io, has come under scrutiny by the SFC for actively promoting its services and products to the Hong Kong public through social media influencers and over-the-counter virtual asset currency exchange shops.

The SFC has clarified that none of the entities under the JPEX Group are licensed by the commission, nor have they obtained the necessary licenses to operate a virtual asset trading platform in Hong Kong.

The SFC’s observations regarding JPEX and the methods used by JPEX and its promoters and exchange shops in Hong Kong are deeply suspicious:

Misleading Claims: JPEX’s website falsely claims to be a “licensed and recognized digital asset and cryptocurrency platform.” The exchange has also falsely stated in its website and local advertorials that it holds licenses from several overseas regulatory authorities, which is not the case.
High Returns: JPEX offers exceptionally high returns on some of its products, with annual interest rates reaching as high as 20%. Such promises of returns raise red flags about the sustainability and legitimacy of these investment opportunities.
Investor Complaints: The SFC has received complaints from retail investors who were unable to withdraw virtual assets from their JPEX accounts or found discrepancies in their account balances.
Non-Compliant Products: Some of the products offered by JPEX appear to involve virtual asset arrangements that are not permitted under the SFC’s regulatory framework for virtual asset trading platforms, such as virtual asset “deposits,” “savings,” or “earnings.”
False Partnerships: JPEX has claimed in its website and local advertorials to have entered into business collaborations with a Hong Kong-listed company and received investments from it. In reality, this collaboration has been terminated, and the listed company has made no such investment.
Misleading Marketing: Influencers and over-the-counter exchange shops on social media have made false or misleading statements, asserting that JPEX has independently or jointly obtained a license for a virtual asset trading platform in Hong Kong. This is not the case, as none of the JPEX Group entities have submitted license applications to the SFC.

The SFC has communicated its suspicions and concerns to the relevant influencers and exchange shops, demanding that they cease promoting JPEX and its associated services and products.

Under the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance, anyone engaging in transactions involving virtual assets with fraudulent intent or making fraudulent misrepresentations to induce others to enter into virtual asset agreements may be subject to criminal liability.

Furthermore, the SFC has the authority, under Section 53ZTH of the Ordinance, to take action against anyone knowingly or unknowingly involved in activities that contravene the Anti-Money Laundering Ordinance.

The SFC emphasizes the importance of vigilance among investors when presented with seemingly lucrative investment opportunities. It is crucial to exercise caution, especially when receiving investment advice from social media influencers who are not necessarily financial professionals.

Investors are once again urged to be cautious when trading virtual assets on unregulated platforms. In cases where such platforms cease operations, go bankrupt, suffer hacks, or witness asset misappropriation, investors may face difficulties in seeking recourse, and legal avenues for compensation may be limited. To verify the licensing status of any virtual asset trading platform, investors can refer to the SFC’s list of licensed virtual asset trading platforms.

In conclusion, the SFC’s warning serves as a reminder of the potential risks associated with unregistered cryptocurrency exchanges and the importance of due diligence when considering investment opportunities in the virtual asset space.

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