The city of Hong Kong is facing what is reportedly its “largest-ever fraud case” as the number of victims in the JPEX saga continues to rise, with local police making more arrests in connection with the case. 

The JPEX Case

According to a report by Hong Kong Free Press (HFRP), 2,086 persons have been identified so far as victims of the crypto exchange JPEX’s fraudulent actions. The police are also said to have arrested three more people who are suspected of being conspirators in the financial fraud, which has caused investors to lose over $166 million.

One of those arrested is former lawyer and crypto influencer Joseph Lam, who happens to have close ties with the crypto exchange. These arrests bring the total number of arrests to 11, and the investigation is said to be ongoing, with more arrests expected to be made. 

The JPEX saga began when Hong Kong’s financial regulator, The Securities and Futures Commission (SFC), released a statement on September 13 warning investors that JPEX wasn’t licensed to operate a virtual asset trading platform (VATP) in the city. It also mentioned that there was no pending application by the exchange to operate in Hong Kong.

This warning was released in rebuttal of the exchange’s representation on its website that it is “a licensed and recognized platform to facilitate the trading of digital asset and virtual currency.” JPEX also claimed on its website that it was licensed by certain regulators abroad, which is apparently a lie. 

In its statement, the SFC mentioned that it had received complaints from retail investors of their inability to withdraw their assets from their JPEX accounts or them discovering that their account balance had been “reduced or altered.”

Following this, a user on the X (formerly Twitter) platform noted that the crypto exchange had hiked its withdrawal fee to $999, probably in a bid to dissuade users from withdrawing their assets, as it also capped the maximum withdrawal limit at $1,000.

Meanwhile, on September 17, JPEX released a statement where it blamed the liquidity crunch it was facing on its partnered third-party market makers who had “maliciously frozen funds.” These market makers had apparently done this because of the regulatory scrutiny and negative news that the exchange was facing. 

JPEX Not Backing Down

In a statement released on September 21, JPEX seemed to suggest that there was little or nothing the authorities could do against it as its team members are “in unknown places around the world.” According to the exchange, it has never operated a “physical corporate structure” as it is an “obstacle to promoting cryptocurrency globally.”

The crypto exchange also alluded to the SFC’s unfair treatment as it stated that the Commission had treated it “with vague guidelines and unfounded charges.” It noted that the SFC had also instructed telecommunications providers to block users’ access to the platform.

As a result of these “unfair bureaucratic practices,” the exchange has decided to transform into a DAO in the hopes that this will help it get “out of trouble and get back on track as soon as possible.”

According to the statement, JPEX “will continue to operate unswervingly” no matter what happens. The exchange’s website is still operational at the time of writing.