The Hong Kong Securities and Futures Commission (SFC) has issued a stern warning to the unregistered cryptocurrency exchange JPEX, cautioning that it may face criminal charges for actively promoting its services to the Hong Kong public through influencers and over-the-counter virtual asset money changers.
The SFC also expressed deep concerns about JPEX’s savings product, which promises an annual percentage yield of 21% for ETH, 20% for BTC, and 19% for USDT, categorizing it as a high-risk investment.
In its warning issued to JPEX, the Hong Kong SFC emphasized that no entity within the JPEX group possesses a license from the SFC or has applied for one to operate as a Virtual Asset Trading Platform (VATP) in Hong Kong.
The SFC raised several red flags concerning JPEX’s practices and its promotion to the Hong Kong public. These include false claims of being a licensed digital asset trading platform, offering exceptionally high returns on certain products, reports of retail investors encountering difficulties in withdrawing virtual assets, and the offering of products that potentially contravene the SFC’s regulatory framework for VATPs.
The SFC strongly advises against making misleading statements regarding business collaborations and investment partnerships, particularly those involving Hong Kong-listed companies.
Furthermore, they point out that Key Opinion Leaders (KOLs) and Over-the-Counter Virtual Asset Money Changers (OTC Shops) have made false claims about JPEX’s licensing status on social media.
Fraudulent misrepresentations of this nature can result in severe penalties, including fines of up to $1,000,000 and imprisonment for up to seven years upon indictment. On summary conviction, fines at level 6 and imprisonment for six months can be imposed. These stringent measures underscore the seriousness of deceptive practices within the virtual asset industry.
The SFC has initiated contact with these influencers and OTC Shops, expressing their concerns and urging them to cease the promotion of JPEX and its associated services and products.
The SFC in Hong Kong has made it abundantly clear that they possess the authority to take action against entities engaged in fraudulent or deceptive practices related to virtual assets. They are fully prepared to enforce regulations against individuals and entities that fail to comply with their rules.
Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), participating in fraudulent or deceptive activities involving virtual assets is deemed a criminal offense. This encompasses schemes with the intent to defraud or deceive, engaging in deceptive practices, and making fraudulent misrepresentations to induce transactions involving virtual assets.
Violations of the AMLO carry severe penalties, including fines of up to $10,000,000 and imprisonment for up to 10 years upon conviction on indictment. Even on summary conviction, individuals may face fines of up to $1,000,000 and imprisonment for up to three years.
The AMLO empowers the SFC to take action against individuals knowingly or unknowingly involved in contravention-related conduct. They stress their commitment to enforcing the VATP regime and caution investors to exercise vigilance when encountering investment opportunities that appear too good to be true, particularly those promoted by KOLs who may lack professional investment expertise.
Additionally, the SFC advises investors to be cautious of the risks associated with trading virtual assets on unregulated platforms, as they may encounter challenges when seeking recourse in case of platform issues. Investors are encouraged to consult the SFC’s list of licensed virtual asset trading platforms to verify the licensing status of any VATP.