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Hong Kong Securities Regulator Warns Online Promoters of Misleading Investors on Crypto Exchange JPEX

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The Hong Kong Securities and Futures Commission (SFC) warns against cryptocurrency exchange JPEX

The SFC issued a warning on Wednesday against the use of the cryptocurrency exchange JPEX, accusing it of “suspicious features” and promoting misleading information about its licensing.

False claims about licensing

Online influencers and over-the-counter virtual asset money changers (OTC shops) were making false or misleading statements about JPEX having applied for a virtual asset trading platform (VATP) licence in Hong Kong, the city’s chief financial regulator said in a statement posted to its website.

“No entity in the JPEX group is licensed by the SFC or has applied to the SFC for a license to operate a VATP in Hong Kong,” it said.

Investor caution advised

The SFC warned investors to “be cautious about investment opportunities that seem too good to be true”, adding that investment advice posted on social media platforms is often done by paid promoters, not investment professionals.

JPEX’s response

JPEX’s website also asserted that the platform is “licensed and recognised” to facilitate the trading of virtual assets with several overseas regulators – another claim the SFC said was “not true”.

In a statement on its website, JPEX responded to the SFC’s claims, saying it still plans to apply for a licence. “We are determined to create an ideal Web 3.0 community and have consistently complied with regulations and licensing systems in different regions,” the company said.

SFC’s efforts to regulate crypto activities

The SFC’s warning is part of efforts to rein in unregulated crypto activities in the city. As part of Hong Kong’s push to become a crypto hub, the SFC launched its VATP regulatory regime in June, mandating that exchanges servicing retail customers apply for and receive approval within a one-year grace period.

Risks of unregulated VATPs

The SFC said local investors should be wary of the risks of unregulated VATPs, which could result in the loss of funds if the platform shuts down, goes bankrupt, is hacked or otherwise misappropriates assets, leaving users with little recourse.

Call for disclosure of problematic platforms

The SFC’s caution comes only weeks after Legislative Council member Duncan Chiu warned that criminals were taking advantage of Hong Kong’s support for crypto to carry out illegal activities and that some investors were publishing exaggerated and misleading advertising content.

The lawmaker said regulators and law enforcement agencies should prevent such activities, and called on the SFC to disclose operators that had no intention of applying for licences or were not licensed so that the public could avoid transacting with problematic platforms.

Official list of licensed exchanges

The SFC notice directed investors to check its official list of licensed exchanges, which still only includes HashKey and OSL, which previously participated in the voluntary licensing scheme and were recently granted a licence upgrade to serve retail investors.

Enforcement action against violations

Under Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance, through which the VATP licensing scheme was implemented as an amendment, virtual asset fraud can lead to a fine of up to HK$10 million (US$1.3 million) and imprisonment for 10 years.

“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,” the SFC said.

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