Hong Kong authorities cuff six in connection with floundering crypto platform JPEX

Hong Kong police on Monday arrested six people connected to cryptocurrency trading platform JPEX.

The arrests occurred the same day JPEX froze transactions.

While the police did not name those apprehended, local media published photographs alleged to depict an influencer and a YouTuber who were reportedly among those arrested. Police reportedly searched offices used by the social media celebs, plus various cryptocurrency offices in Hong Kong.

The Special Administrative Region (SAR) of China has pushed a vision of becoming a global crypto hub, but has also been clear that players must meet licensing requirements.

Police reportedly told press they had received 1,480 fraud complaints against JPEX, and the related investigation so far totalled around a billion Hong Kong dollars ($128 million).

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JPEX was reportedly operating in Hong Kong without a license.

Hong Kong's Securities and Futures Commission (SFC) revealed last week it was aware that JPEX had been using social media influencers, key opinion leaders, and over-the-counter virtual asset money changers – but that it had no license to operate a virtual asset trading platform in the SAR.

The SFC also called out JPEX for lying on its website and marketing material by claiming it actually did have a license to trade digital assets and virtual currency. In fact, it hadn't even applied for one. Furthermore, the products it did offer were not allowed under SFC regulations.

The commission also noted that JPEX offered "very high returns for some of its products" and that many of the platform's customers had reported they were unable to withdraw funds from their accounts.

"The SFC will not hesitate to take enforcement action against individuals and entities who fail to abide by the VATP regime administered by the SFC, including those who are involved in such violations," warned the commission – which appears to have made good on its words.

Hong Kong's chief executive, John Lee, expressedhis belief that investors should only consider licensed crypto outfits.

"The licensing regime that has been introduced … is to protect investors so that they can invest under (a) very effective regulatory system to ensure that their assets and their investments are protected (and) to ensure that there will be (a) good risk control system that ensures that the money they put into the investment will not be abused by the platform," he explained.

JPEX has characterized the actions against it as unjust.

"Recently, due to the unfair treatment by relevant institutions in Hong Kong towards JPEX, a cryptocurrency trading platform, and a series of negative news, our partnered third-party market makers have maliciously frozen funds," reads a JPEX statement issued on Sunday.

JPEX said it was currently negotiating with the third-party market makers, but could not disclose any details "to avoid negatively impacting the negotiation outcomes."

"We promise to recover liquidity from third-party market makers as soon as possible and gradually adjust the withdrawal fees back to normal levels," the crypto exchange platform insisted. ®