Six arrested in crypto probe

Barrister-turned-insurance manager and social media influencer Joseph Lam Chok was among four men and two women arrested yesterday on suspicion of conspiracy to defraud over his role in cryptocurrency trading platform JPEX.

The case involves HK$1 billion in assets and at least 1,400 complaints.

The arrests came after the Securities and Futures Commission issued a warning on Wednesday that JPEX was unlicensed.

But JPEX yesterday tore into the SFC for "continuous unfair treatment" and insisted it will continue to operate, though there was no trading on the platform yesterday.

Among the arrested was another influencer, Chan Yee, for allegedly helping advertise JPEX.

Lam is said to have promoted the platform on social media and stated he wants to be a JPEX partner.

Despite trying to cut ties from the platform on Sunday, Lam was arrested yesterday and police searched his office at Entertainment Building in Central, taking away four boxes with material and a large amount of cash.

It is understood Lam was being detained overnight but would be granted bail today.

Lam's girlfriend, Wada Hiromi, said she was not too worried and would "stand by" her man.

Police seized various material from Chan Yee's crypto shop CYOTC at Wing On Plaza in Tsim Sha Tsui, including stacks of cash.

They searched other exchange stores promoting JPEX, including two Coingaroo branches in Tuen Mun and Causeway Bay, which claims to be the largest cryptocurrency store in Hong Kong.

Coingaroo said it would not mention or promote any unlicensed platform on its social media page after the SFC warning.

JPEX has shut down trading since yesterday morning, saying third-party partners maliciously froze funds due to "unfair treatment by relevant institutions" and "negative news."

Users will not be able to place new orders on its Earn Trading interface, with a statement on Sunday referring to wealth management products. JPEX was said to be negotiating with third-party market makers to resolve a liquidity shortage.

It also said the team responsible for handling emergency withdrawal requests will prioritize withdrawals to users.

The SFC has said the firm was operating as an unlicensed entity, issuing the first warning by the watchdog since China boosted efforts to grow Hong Kong's presence as a crypto hub by attracting more investors.

It said the platform was conducting suspicious promotional practices, including stating falsely on its website and in local advertorials that it obtained licenses from certain overseas regulators, but it had never applied for a license with the SFC.

The regulator said influencers and over-the-counter virtual asset money changers have made false or misleading statements on social media to suggest JPEX has applied for a license in Hong Kong, either independently or in partnership with a Hong Kong-listed company that was not named.

Lawyer Wilfred Lam Kwok-hing said the legal responsibility of partners of JPEX depended on their interactions with any victim. He added: "If it is proved they were involved ... there would be a high probability of violating the law."

He urged victims to keep transaction records and provide evidence to police.

Executive Councillor Ronny Tong Ka-wah said it would be an offense if someone assisted in the promotion or advertising for an organization that they knew did not have a license.

And barrister Albert Luk Wai-hung said conspiracy to defraud does not take into account the extent of a person's involvement.

"If they say they know nothing about the crime, if he or she is educated and has working experience, we will have to see whether the court believes that he or she has been cheated."

stacy.shi@singtaonewscorp.com