Crypto platform blocked on police orders

Users were unable to log in to cryptocurrency trading platform JPEX yesterday as police asked local telecom service providers to block the site.

It is the first time that police have intervened for a nonnational security reason, after about 10 websites had been blocked involving the national security law that was enforced on June 30, 2020.

Actor-singer Julian Cheung Chi-lam gave his statement at Wan Chai police headquarters and was asked to assist in the investigation.

Cheung was among the celebrities who endorsed the troubled cryptocurrency trading platform, although his manager said they had forbidden JPEX from using Cheung's advertisement last year unless it registered for a license.

On Wednesday, JPEX had announced a proposal for all its users to leave their assets on the platform for two years and retrieve them as Tether coins later.

The platform requested its users to vote for the execution of the new proposal and said it would complete the adjustment on May 1 next year if the plan received enough votes.

An investor surnamed Tong said he would not vote as he was worried the platform might eventually lose all his assets. Tong said he had reported to police, hoping to retrieve at least half of his investment, without specifying the amount.

Blockchain technology consultant Louis Li Sze-chung warned investors to be careful and not to fall into yet another trap.

Several network service providers have complied with police to stop users from accessing JPEX, such as CSL Mobile and 1010, sources said.

It comes as police arrested three more men on suspicion of conspiracy to defraud, bringing the total arrests to 11 people, aged between 22 and 52. Sources said one of them is a self-proclaimed investment expert on YouTube, Stanley Chu.

As of 5pm yesterday, police received 2,197 reports involving HK$1.37 billion.

However, JPEX said the platform will continue to operate as usual despite the "unreasonable blockage," asking users to log in using VPN.

The unlicensed JPEX was able to continue its operations under a one-year grace period on a new regulatory regime for virtual asset trading platform introduced by Securities and Futures Commission in June.

Emil Chan Ka-ho, cochair of the Digital Finance Association, criticized the SFC action, saying: "The authorities should have established a regulatory regime two to three years ago when virtual asset trading started to grow."

The SFC slammed JPEX for publicizing confidential correspondence with the regulator and making "false and misleading claims," after the platform shared e-mail screenshots to the regulator to prove it had sought to obtain a license.

JPEX filed an application for deregistration in Australia on Tuesday, claiming its assets were less than A$1,000.

Hong Kong lawmaker Edmund Wong Chun-sek called on investors to file a claim for their loss in Australia before the owners take the money and flee.

"A company needs to prove that it bears no debts or is not being prosecuted when applying for deregistration, and investors should file claims as creditors before it is wound up, or they may encounter more difficulties in retrieving the assets," Wong said.

stacy.shi@singtaonewscorp.com