Since September 13th, the Hong Kong Securities and Futures Commission (SFC) has issued a warning statement regarding unregulated virtual asset trading platforms on its official website, the JPEX incident has suddenly escalated and become uncontrollable. Despite the attempts made by the unregulated cryptocurrency exchange platform to fight back by publishing articles accusing the SFC of malicious targeting or claiming to have been in contact with relevant departments to withdraw and rectify the project, the situation of the incident has not been reversed and is rapidly heading towards collapse. It turns out that everything is not as simple as it seems to be unregulated on the surface.
At the recently concluded Token2049 Singapore conference, the grand conference gave some people an opportunity to change their lives under the bear market, while others had to be forced to change their fate at the conference. On the first day of the conference on September 13th, the day after the exchange released the Token2049 Singapore conference press release, the Hong Kong police arrested the major executives of JPEX, directly causing the JPEX employees participating in the Token2049 Singapore conference to completely abandon their prepared booths and flee the event. The exchange subsequently applied for voluntary deregistration with the Australian Securities and Investments Commission (ASIC) and stated that its remaining assets in Australia are almost gone. To prevent capital flight, JPEX platform increased the withdrawal fee for each transaction to 999 USDT, causing a stir on social media with the spread of the sky-high withdrawal fee. At this point, anyone can smell the unusual atmosphere.
On September 19th, at the request of Carrie Lam, the Chief Executive of Hong Kong, the SFC and the Commercial Crime Bureau of the Hong Kong Police held a press conference regarding the JPEX incident to respond to the recent questions about secretly contacting the project party, delaying the external warning after conducting an investigation and obtaining conclusions, resulting in a large number of user losses. The SFC stated that JPEX was listed as a pending investigation target a year ago, and once the SFC obtained the authority to regulate virtual asset platforms in June this year, it immediately launched an investigation and issued a warning to the public. In the future, any platform information that does not comply with regulations will be promptly announced as a warning on the SFC’s official website.
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On September 20th, a notice from JPEX showed that a portion of the $400 million worth of Tether (USDT) user deposits will be eligible for redemption, but the problem is that these funds can only be redeemed starting from the end of 2025. At the same time, the company stated that due to the ongoing law enforcement investigation, its telecommunications service provider and asset custodian have frozen the applicable services, so the redemption result of these user deposits may be indefinitely delayed. Before the collapse of the incident, JPEX even conducted marketing activities including providing free coupons to any registered users, offering up to 300 times leverage for trading, and an annual stablecoin pledging yield of more than 30%, which accelerated the collapse. Although JPEX had once promised “not to close down”, the company has now suspended all services.
On September 21st, according to the news released by the Hong Kong police, the police have currently arrested 11 individuals involved in the JPEX cryptocurrency exchange incident, including “crypto king” Lin Zuo and Chen Yi, as well as 1 executive and 3 employees. In addition to operating an unlicensed virtual asset exchange, they are also facing more serious charges of fraud. According to external data, it is estimated that at least over 2,000 users have been affected by this incident, with the amount involved reaching 1.3 billion Hong Kong dollars (approximately 1.213 billion RMB). The police have stated that the assets of these users have been misappropriated by JPEX staff and are currently under investigation. They will continue to extradite the individuals involved back to Hong Kong.
Even well-known entertainer Zhang Zhi-lin is implicated in this incident and had to rush back to the police station overnight to cooperate with the investigation and have a “videotaped meeting”. Zhang Zhi-lin and his agency have clarified that they have not participated in any investments. However, back when JPEX was established, in order to promote its influence in Hong Kong, they sought help from Zhang Zhi-lin and others. But regarding the content of the advertisements filmed, Zhang Zhi-lin’s agency had already notified JPEX in writing in May 2022, requesting that they not use Zhang Zhi-lin’s image for any promotion before obtaining a “license” in Hong Kong, and reserving the right to hold JPEX accountable.
Regarding this incident, Hong Kong Chief Executive Li Ka-chiu emphasized at a press conference, “This incident once again highlights the importance of the government’s repeated emphasis on avoiding investment risks. When investors want to invest in virtual assets, it is important to invest in platforms that have obtained licenses. Otherwise, it may be difficult to effectively recover losses caused by risky investments and obtain legal protection.”
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