Some senior people in the currency circle told Tencent News "Perspective" that JPEX did not harvest people from the currency circle. At least they have not heard of any "old players" in the currency circle being defrauded by JPEX. In their view, JPEX’s methods are suitable for new “leeks”. For old “leeks”, these methods are leftover from the previous currency circles.
A currency exchange called JPEX is becoming the focus of heated discussions in Hong Kong due to its involvement in a "fraud" of HK$1.37 billion and the unexpected "boost" of Hong Kong star Julian Cheung. Public information shows that there have been more than 2,000 victims, including some mainlanders.
This is also the largest “fraud case” currently involving the Hong Kong currency circle.
The case occurred on September 13. The Hong Kong Securities and Futures Commission named JPEX and those who actively promoted JPEX to the Hong Kong public, and pointed out that it involved at least six suspicious business practices such as currency exchange shops.
The next day, JPEX announced that it needed to adjust its business due to the China Securities Regulatory Commission’s statement and would adjust the currency withdrawal fees. Immediately, some users in Hong Kong posted on social media, saying, “Each withdrawal limit is limited to 1,000 USDT (USD). Stable currency), you need to pay a handling fee of 999 USDT", which means that withdrawals are not allowed in disguise. This news spread quickly in Hong Kong, and more and more people found that they were unable to withdraw cash from JPEX.
On September 16, the Hong Kong Securities and Futures Commission announced that JPEX may be involved in fraud and has referred it to the police for follow-up. On September 17, JPEX stated that it had suffered funds being locked by a third party and announced that it would “remove all transactions on the financial management page” in the early morning of the 18th. Subsequently, on September 18, Hong Kong police took action and arrested eight people that day, including local Internet celebrity Lin Zuo who had done a lot of publicity for JPEX and claimed to be a JPEX partner.
As of the afternoon of September 22, the Hong Kong Securities Regulatory Commission and the police have successively arrested 11 people, including well-known local Hong Kong Internet celebrities Lin Zuo, Chen Yi and others. The artist Zhang Zhilin, who once filmed a brand ambassador promotional video for the trading platform, also On September 19, he went to Wan Chai Police Station to cooperate with the investigation. Zhang's agency later issued a statement stating that the cooperation had been terminated in September 2022.
Although the police have frozen the exchange's bank cash of approximately HK$15 million and three properties worth approximately HK$44 million, these assets are only a drop in the bucket compared to the "fraud amount" of HK$1.37 billion.
This case has attracted much attention because it is the first "fraud" since the Hong Kong SAR government has made a high-profile statement this year to compete for the "Asia Web 3.0 Center", especially since Hong Kong officially started to implement the exchange licensing system on June 1 this year. case.
A person who has been in the currency industry for many years and has interacted with Hong Kong supervision told Tencent News "Perspective" that JPEX will not be the first fraud case in Hong Kong, let alone the last.
At the end of December last year, AAX, a Hong Kong-based currency trading platform, collapsed. In addition to the arrest of two senior executives, other senior executives took away HK$230 million and fled overseas.
According to Tencent News "Perspective", after the implementation of the currency exchange license system on June 1 this year, Hong Kong supervision has so far only issued licenses to Harshkey, a subsidiary of Wanxiang Group, and OSL, a subsidiary of BC Group. However, no A few unlicensed exchanges are still active in the Hong Kong market.
In accordance with the requirements of the Hong Kong Securities Regulatory Commission, currency exchanges that have been operating in Hong Kong and have actual business before June 1, if they intend to apply for a license, will be given one year to make transition arrangements, that is, these institutions will be able to make transitional arrangements here. You can continue to operate even if you do not obtain a license during the year. This also gives institutions like JPEX the opportunity to continue operating after June.
But why did something happen to JPEX first before the one-year transition period came?
"Wealth creation" and high-interest routines, dedicated to harvesting new "leeks"
After the incident, how JPEX was able to "harvest" more than HK$1 billion under the eyes of regulators has also become a topic of concern in the market.
Some senior people in the currency circle told Tencent News "Perspective" that JPEX did not harvest people from the currency circle. At least they have not heard of any "old players" in the currency circle being defrauded by JPEX. In their view, JPEX’s methods are suitable for new “leeks”. For old “leeks”, these methods are leftover from the previous currency circles.
Tencent News "Pianwang" found through combing that JPEX, which claimed to be founded in 2020, carried out a lot of publicity in Hong Kong during the epidemic. In addition to inviting local Internet celebrities such as Lin Zuo to participate in the publicity, it also went to places with very high traffic in Hong Kong. The subway entrances in Central, Causeway Bay and Tsim Sha Tsui are filled with JPEX advertisements. According to a JPEX promotional document, its promotional expenses in Hong Kong are close to more than HK$40 million.
Some victims who were deceived said on social media that they only learned about JPEX after seeing the advertisement at the Central MTR station. They believed it because it was placed in the advertisement position of the government-owned MTR Corporation. The MTR Corporation later responded to inquiries from local media and stated that the MTR Corporation's advertising was handed over to the agency, and that JPEX advertisements would no longer be published after June 2022.
Like the Chinese currency circle in the early reckless era, JPEX also used many seemingly specious promotional ideas to mislead investors. For example, JPEX called itself "Japanese Cryptocurrency Exchange" in an advertisement at the Central MTR station at the time. Its name, JPEX, was only one letter different from the abbreviation of Tokyo Exchange, JPX. In fact, this company has nothing to do with Japan.
Hong Kong police have also stated to the outside world that some of the people involved advertised "making money every day" and attracted users by sharing luxury cars and luxury goods. Among the search items announced by the police, there are indeed many luxury goods worth millions.
What is even more exaggerated is that at an event in June this year, JPEX directly paid HK$10 million in cash to the father of Hong Kong e-sports, Chung Pei-sheng, who is also the third generation of a billionaire family in Hong Kong.
JPEX provides users with similar functions to most exchanges, including allowing users to exchange a variety of cryptocurrencies including Ethereum on the platform, and allowing users to transfer assets from other exchanges to JPEX accounts. JPC, the currency of JPEX’s own platform, will also be issued in August 2022.
Some people in the currency circle told Tencent News "Perspective" that JPEX's model is not unfamiliar. Before supervision, many exchanges operated in this way, attracting "leeks" with high interest rates and wealth creation. The latter is not only greedy, but In addition, more importantly, I thought that I would not be the last one to "beat the drum and spread the flowers".
Materials released by the China Securities Regulatory Commission show that as of September 12, JPEX has promoted the platform’s current financial products, providing annualized returns of 21%, 20% and 19% respectively on Ethereum, Bitcoin and USDT USD stablecoins. .
These "wealth-making" and high-interest operations were indeed commonly used methods in the early currency circle. The above-mentioned senior currency circle person told Tencent News "Perspective" that only new "leeks" will continue to believe in such a simple model.
Of course, there are still some people who are misled by JPEX into thinking that it is a legal and compliant trading platform. The Hong Kong Securities and Futures Commission announced that JPEX claimed to be established in Dubai and obtained a local license, but this was not the case, and it had not obtained a license from any region including Dubai.
The mysterious trader, the wanted man in black
The management capabilities and credibility of the trader are very important to a currency exchange. However, even though Hong Kong regulatory authorities and the police have worked overtime to handle the case in the past few days at the request of Hong Kong Chief Executive Li Jiachao, so far, there has been no official news to confirm who is the operator behind the JPEX platform.
Among the 11 people currently arrested by the Hong Kong police, in addition to internet celebrities Lin Zuo, Chen Yi and Chen Kaiyi, Hong Kong local media "01 News" reported that there are also Huang Zhengjie's assistant Mo Junting, who once spread money on the streets of Hong Kong, and BeatBox singer Huang Haobang , Zhu Gongzi, a famous speaker in the local currency circle, and 6 other people. The remaining five people are mostly ordinary employees of JPEX. According to the media report, these people are mainly company secretaries and related personnel, including college students who have not yet graduated as company secretaries.
Tencent News "Pianwang" learned from insiders that JPEX will make nearly US$100 million in profits in 2022, all of which will be used for dividends. In addition, JPEX has also tried to cooperate with local exchanges in Hong Kong that take the compliance route.
At the same time, there are constant rumors in the market that the founding team of JPEX has a local "underworld" background. Although it has not been confirmed, it is an indisputable fact that JPEX is more "vicious" than the usual currency exchanges.
According to the above-mentioned senior currency circles and information from "01 News", a few months ago, a mainland user invested hundreds of thousands of dollars in JPEX and wanted to withdraw cash but was unable to do so. The platform staff informed him that he could go to Hong Kong to withdraw. After arriving in Hong Kong, the user was injured by a man in black, who then ran away. According to "01 News", the police are now looking for four people, including the man in black.
The above-mentioned people in the currency circle told Tencent News "Perspective" that no one knows the real behind-the-scenes person of an exchange that has been active in Hong Kong for more than three years. Perhaps the exchange has already done a good job since its establishment. He was ready to run away, but it only caused misery to these new "leeks".
OTC stores are prevalent, and they are walking in a gray area of supervision
The new "leeks" in the Hong Kong currency circle still exist, partly because of the convenient way to purchase virtual currency in Hong Kong, that is, the virtual currency exchange shops, or OTC shops, that can be seen everywhere on the streets.
This kind of store is very convenient for newcomers who want to try the currency circle. Users only need to walk into the store to quickly purchase virtual currencies, especially the stable currency USDT, through cash or transfer, without the need to trade with strangers online.
In fact, OTC is a virtual currency buying and selling market for the retail public. During the epidemic, the expansion of such exchange shops in Hong Kong was crazy. Tencent News "Perspective" once found many in markets where elderly people are concentrated, and witnessed many neighbors entering the store to buy.
These OTC stores are also one of the customer acquisition channels for Hong Kong currency trading platforms such as JPEX. In the past, some OTC shops used the gimmick of buying and selling Bitcoin at a discount to attract customers. Some owners of JPEX said on social media that after purchasing virtual coins through street OTC, OTC sales will guide users to store virtual coins in JPEX, which is equivalent to a fixed deposit, and will give super-market interest rates - which is also a lot Users like it.
Tencent News "Peripheral" learned that the Coiner exchange shop in Wan Chai was raided by the police after the JPEX incident. Coiner was established in Hong Kong in 2020.
There are no specific statistics yet on how many OTC exchange shops there are in the Hong Kong market. People in the currency circle, including some lawyers, told Tencent News "Perspective" that OTC exchange shops now fall into a regulatory gray area in Hong Kong.
Tencent News "Perspective" learned that according to Hong Kong regulations, money exchange shops that exchange Hong Kong dollars on the street need to apply for a license from the customs because they operate remittance or currency services, but virtual currencies traded in OTC shops are not considered in Hong Kong. As "currency", it is just a commodity. This type of OTC store does not yet need to apply for a license from the customs. At the same time, such stores are not trading platforms and are not regulated by the Hong Kong Securities Regulatory Commission.
Jiang Yuhuan, a member of the Legislative Council who was a lawyer, said on Hong Kong local radio that regarding the lack of supervision of virtual currency OTC stores, Hong Kong can refer to the methods of other regions that allow the Hong Kong Monetary Authority to supervise virtual asset service provider financial companies.
A senior person in the currency circle who has long been paying attention to Hong Kong's virtual currency regulatory regulations told Tencent News "Perspective" that Hong Kong's virtual currency OTC is still growing wildly. If it continues to be unregulated, problems will occur sooner or later.
However, he also feels that there is a problem with Hong Kong’s current regulatory requirements for currency exchanges to build their own custody platforms. Even if the regulations require licensed exchanges to store at least about 95% of their assets in cold wallets (wallets that store private keys offline) ) and store it in the bank with corresponding equivalent cash, but “this still does not guarantee that the exchange will not misappropriate users’ virtual coins, especially when the exchange experiences a run or faces bankruptcy.” In his opinion, in this case, it is inevitable that some exchange operators will take risks and steal users' virtual coins.