The crypto fire in Hong Kong was still budding, but a bucket of heart-breaking cold water was poured on it.
On September 13, the Hong Kong Securities and Futures Commission rarely named a virtual asset platform JPEX. This was also the first virtual asset exchange to receive a red card warning since Hong Kong’s new encryption regulations.
According to the official website of the Securities and Futures Commission, JPEX actively promotes the platform’s services and products to the Hong Kong public through social media influencers and over-the-counter virtual asset currency exchangers. None of the entities under the JPEX Group has been licensed by the SFC, and has not applied for a license from the SFC to operate a virtual asset trading platform in Hong Kong.
Regarding the naming, JPEX claimed in its official website response on the same day that "it has been unfairly suppressed by the Securities Regulatory Commission, which has led us to consider withdrawing our license application in Hong Kong and adjust our future policy development accordingly. The Securities Regulatory Commission also responded to the damage to Hong Kong's cryptocurrency We take full responsibility for our development prospects." Judging from the attitude, JPEX is obviously dissatisfied, believing that there are countless institutions claiming to have applied for exchange licenses, and being announced can only prove the discrimination of the China Securities Regulatory Commission, and the last sentence is even more arrogant.
What’s even more funny is that despite the tough response, at the Token2049 event held that day, the JPEX platform was completely deserted. A booth requires at least 10,000 U of booth fees.
JPEX ran away in a hurry in Tokens2049, source JOY@joyxspacelatte
After that, the course of events became increasingly bizarre.
On September 14, a screenshot of a cash withdrawal went viral in many crypto communities. After a certain KOL withdrew 1,000U from JPEX, only 1U was received, and the handling fee was as high as 999U, so he angrily called it a "pheasant exchange" on Twitter. JPEX responded again, blaming the CSRC for naming and criticizing it, saying that it had "no choice" to adjust the USDT handling fee in the early morning of the 14th due to the statement. The statement undoubtedly set off a heated discussion on Twitter, with discussions of industry abuse continuing.
Withdrawal screenshot, source: [email protected]
After withdrawing money from the withdrawal address given in the statement, the amount received increased to 20U, showing a rogue attitude of "you can obviously rob it, but you have to take it reasonably." At present, the exchange is no longer able to withdraw cash. The police have intervened in the investigation, and the Internet celebrities involved in carrying goods have also been affected. According to the police, as of 22:00 on the 18th, a total of 1,641 people have received reports on related incidents. The amount involved Approximately 1.2 billion yuan, and the investor with the largest investment amounted to 40 million yuan.
At this point, the crusade against JPEX has spread to the entire Hong Kong and Taiwan encryption industries.
01
Is there any truth in the description on the JPEX official website?
What kind of exchange can be so rogue and stubborn? With this question in mind, the author gathered information from all parties to base JPEX, and this also exposed an even more surprising scam.
In fact, the people of Hong Kong are no strangers to JPEX. The exchange’s promotional posters can be found in major mainstream neighborhoods in Hong Kong. Judging from the official website promotion page, the JPEX exchange is headquartered in Dubai. It has focused on serving the Asia-Pacific region for 20 years and claims to have obtained the Canadian MSB Fintrac license, the Australian ASIC licensed business, and the MSB financial license issued by the US FinCEN.
But back to reality, the actual situation is quite different from the introduction. JPEX changed its name to JPEX Greenstone Exchange this year and officially entered Hong Kong in 2021, mainly using Internet celebrities + off-site large-scale promotion. At the beginning of its entry into Hong Kong, it deliberately tried to catch up with the Japanese crypto exchange JPX and hyped it as a famous Japanese exchange, forcing JPX to personally clarify on February 8, 2022 that the similar name had nothing to do with the main entity. After the clarification, JPEX responded as always that the company has nothing to do with JPX, but even if you search for the exchange on Baidu now, there are still words and phrases such as Japan Exchange and Singapore Headquarters associated with it.
JPX Japan Exchange clarifies that it has nothing to do with JPEX, source JPX official website
This is obviously not the only time the malicious conflict occurred. In early 2022, JPEX established a partnership with Simplex and announced the launch of VISA cards in the fourth quarter. JPEX refused to give up the hype opportunity and carried out extensive promotion in the name of VISA cooperation. Naturally, VISA was not happy. After issuing the notice of negotiation, JPEX immediately apologized and made excuses. It claimed that it planned to cooperate with VISA's card issuers to issue cards, instead of directly cooperating with VISA. It blamed the advertising contractor for the wrong promotion. However, on the official website, JPEX still has a VISA cooperation promotion section, focusing on an attitude of bowing your head, admitting your mistakes, and doing it again next time.
The license it claims to have obtained is even more suspicious. According to "Hong Kong 01", after an investigation at the multinational company registries, it was found that JPEX registrations in various places were suspected of being "capitation" registrations. Since the platform was registered in 2020 and started operating in 2021, the actual person in charge of the registration places in many countries around the world, The office location has never been disclosed. As for the registered company, except that the director of JPEX Technical Support is Guo Haolin, no clues about the founder have been found. It is said on the Internet that the founder is "Master Coin" Huang Chengjie, but there is no evidence. And it has cooperated with two listed companies, Tiangong Holdings (0428) and hmvod Video (8103), which also makes people wonder whether it has a capital injection background of listed companies. However, in April this year, both listed companies announced that they would cease cooperation in the exchange’s memorandum of understanding.
Registration status of JPEX in various places, source from Hong Kong 01
The only location that could be checked offline was once again empty. According to Hefeng Logistics, JPEX has rented the 2nd to 6th floors, the 10th floor of No. 7, and the building’s exterior wall advertising in the Asia Blockchain Building. Currently, all personnel have moved out maliciously. The place of registration has not even been disclosed, and the license obtained can only be more nonsense. As expected, the author searched for JPEX on the official website of the US Financial Crimes Enforcement Network (FinCEN), and no results were displayed. What is quite interesting is that after the company withdrew, the beverage company accused it of being in arrears for 1,000 drinks. It makes people lament that JPEX's scythe is so deep that retail investors, landlords, and even neighbors are not spared.
Source: MichaelTurtle @shawnchen_eth, Steward@ZStewardZ
02
Why is JPEX so popular?
How can such an exchange that lies so much continue to operate and even appear on the streets under the name "Hong Kong's largest exchange"?
According to Hong Kong’s current regulations, although the Securities and Futures Commission has been monitoring the issue of unlicensed operations, it must collect evidence to prove that the platform has business operations before it can intervene. Therefore, the marketing and promotion of the platform is not prohibited.
On the other hand, JPEX employs a large number of Internet celebrities and entertainment star platforms through large dividends and publicity expenses. Celebrity artists who have endorsed or promoted JPEX include Hong Kong male artist Julian Cheung, Taiwanese singer Chen Lingjiu, Hong Kong model Zhuang Simin, Hong Kong Internet celebrity "Master Coin" Huang Chengjie, Hong Kong rich second generation Lin Zuo, Toyz, Fat Mom, Chen Dingbang, etc. .
Chen Lingjiu, former spokesperson of JPEX, source: Hong Kong Wen Wei Po
After the incident, many artists expressed their separation from JPEX on the official channel. Zhang Zhilin claimed that he had already informed JPEX in writing in May that it would not use his likeness for promotion before obtaining the license. Spokesperson Chen Lingjiu claimed that he had ended his endorsement in July this year, but according to people familiar with the matter, he even brought pets to visit on August 20. The Asian Blockchain Building where JPEX is located.
In order to quickly attract traffic, JPEX also launched a partnership system to recruit partners with high commissions. The terms show that if 1,000 people are invited to join as JPEX customers, and the average assets invited within 30 days reach 10 million USDT, the partners will receive a monthly reward of 6,000 USDT, equivalent to HK$47,000. In April this year, JPEX upgraded its system again, saying that "the rebate can be up to 100,000 USDT," which is equivalent to HK$780,000. People familiar with the matter revealed that one of the partners of JPEX was Cobito, who had openly sold the exchange before. KYC history.
Cobito is one of the partners of JPEX, source Raysky@rayskyinvest
It can be seen that the exchange already has the basic elements of a pyramid scheme to create profits out of thin air by inviting people to enter the market and share profits. Looking at the products of this exchange, it can be described as illegal written on the public screen. Not only can you get rebates through the node revenue, but the annualized rate of return is as high as an outrageous 13 times. The exchange's live interest financing has even reached 20%, which is comparable to the previous thunderstorm Luna.
JPEX is suspected of being a pyramid scheme, sourced from Shell Complaints
Tracking the trend of its platform currency JPC, the JPEX platform shows that its 24H trading volume is as high as 189 million US dollars, but Coinmarketcap’s data is only 230,000 US dollars, and the trading situation is clearly visible. On the other hand, JPEX has not set a funding rate for perpetual contracts. The fact that such an exchange, which is not in line with common sense in trading, can still survive and develop to such a scale has also left many senior members of the crypto community speechless.
Comparison of JPC data on Coinmarketcap (before) and JPEX exchange (after)
Although there are many doubts, many retail investors still invested money in it due to the visible publicity and high interest rates, which made them the main group of people injured in the incident. As early as June, JPEX had a criminal record. According to a reveal, in June JPEX announced the details of the smart contract to issue boxing match rewards in the "The Cage 2023 Final Battle" held in June. The on-chain data showed that it misappropriated 390,000 USDT of customer assets. Netizens commented, "Take it from households and use it for the people."
It was previously revealed that JPEX misappropriated customer funds, source Raysky@rayskyinvest
On September 18, Hong Kong Legislative Council member Wu Jiezhuang revealed that he has received help from about 30 victims. The amount of loss for each person is different. Some are 6 digits, some are 7 digits. It is estimated that the total amount involved exceeds 100 million Hong Kong dollars. Internet celebrities who had previously promoted were not spared. Zhuang Simin's self-explosion incident promoted on Youtube lost about 500,000 yuan; Toyz, who had received sponsorship fees from JPEX, also lost more than 100,000 US dollars. In the program, he said that JPC's trading volume was doubtful. The interest rate is super high and NFT is not on the blockchain.
03
What is the impact of the JPEX incident?
Judging from the entire incident, the incident caused by JPEX is not surprising to those in the industry who have experienced the ups and downs of the currency circle, but the real and deep victims are the crypto circles in Hong Kong, which are still in their infancy.
Since the new regulations were announced in June, Hong Kong has taken frequent actions. From the chief executive, legislators to grassroots, all have expressed support for Web3, and legislators have publicly stated their support for the development of compliant exchanges in Hong Kong. It was in this bright state that a dark corner emerged. JPEX took advantage of the policy to promote it, blinding many investors.
According to Hong Kong Wen Wei Po, both in Hong Kong and the mainland, there are people who are involved in the large-scale publicity and who firmly believe in Hong Kong's regulatory policies. Some mainland investors said that because they had confidence in Hong Kong's financial regulations, they did not believe that Hong Kong regulators would allow unlicensed trading platforms to exist. In addition, there were no problems with "withdrawing funds" on the platform for the first time, so they were confident that their investment exceeded One million Hong Kong dollars. The incident collapsed before it was accomplished. This incident will undoubtedly affect the confidence of mainland investors in investing in Hong Kong.
Hong Kong obviously attaches great importance to this. On September 18, Hong Kong Legislative Council member Wu Jiezhuang held a separate press conference to respond to the suspected fraud incident of the virtual asset trading platform JPEX, saying that the incident had a great impact on the development of virtual assets in Hong Kong, and the government should do more. Protect small investors more. On September 19, the Chief Executive of the Hong Kong Special Administrative Region, Lee Ka-chiu, stated that this incident reflects the importance of supervision, including the need to invest in regulated and licensed trading platforms, and the importance of personal understanding of virtual assets and related risks. He emphasized that the current licensing system is to protect investors. The Securities and Futures Commission will monitor market changes to ensure that investors' interests are fully protected, and the authorities will also vigorously promote investor education.
Although the new regulations have tightened the supervision of virtual currencies, only two licensed exchanges, OSL and Hashkey, are supervised by the China Securities Regulatory Commission and can guarantee that even if they go bankrupt, customer funds will be compensated up to 500,000 yuan. JPEX is not on the licensed list. It is not supervised by the Securities and Futures Commission, so it can only be investigated by the Hong Kong police for fraud. From the perspective of civil claims, since it is difficult to grasp the legal entity of JPEX and the users are unsecured creditors, the priority of asset distribution during liquidation is ranked behind secured creditors, liquidation expenses, priority payments and floating chargees. According to this argument, it seems that the client's capital is difficult to recover. According to the latest police disclosure, the assets involved in the case have reached 1.2 billion yuan.
Lin Zuo, another partner who is deeply involved in the matter, seems to have foreseen this. He repeatedly discouraged users from reporting the crime in the fan group on the 17th, saying that there would be no results, and that users should not have any illusions about getting their funds back. At present, according to the latest news from Hong Kong Commercial Crime Bureau Acting Chief Inspector Mak Wai-kwong at the case briefing, Lin Zuo and other eight people involved in the case have been arrested by the police. The JPEX crackdown has found 8 million yuan in cash and has frozen more than 12 million yuan in banks. Deposits, 44 million properties.
The person involved, Lin Zuo, was arrested, source Hong Kong Wen Wei Po
Even so, JPEX remains determined. In its recent response, JPEX has repeatedly emphasized its unfair treatment by relevant Hong Kong institutions, pointing out that this has caused market makers to maliciously freeze funds, and stated that it "will continue to operate unswervingly." In order to avoid supervision, it has removed trading products involving financial management from the shelves on the 18th.
JPEX will issue another announcement on September 18, source JPEX official website
Such a shameless and outrageous exchange not only once again labeled virtual currencies as a crime for Hong Kong, which is building a crypto ecosystem, but also exposed the loopholes in Hong Kong's control of virtual assets. It also severely damaged Hong Kong's political circles and investors. For confidence in encryption, follow-up processing will be particularly important. Whether it kills the chicken to scare the monkey or is difficult to trace determines whether this matter is a thorn in the heart of investors or a sword hanging over their heads. It is really a rat excrement, bad A pot of soup.
references:
Hong Kong Wen Wei Po: Virtual currency lacks supervision, and victims accuse Internet celebrities of mistrusting them for fear of losing their investment;
Hong Kong Afternoon Tea: More than 1,000 people reported the JPEX case to the police, involving 1 billion! Hong Kong's second-generation rich man, Lin Zuo, and four other men and two women were arrested! …
Shell Complaint: JPEX, the 100-billion-dollar sacred disk in Taiwan’s currency circle, defrauded millions of people and was exposed by the Hong Kong Securities Regulatory Commission!
Consulting Index: One article reveals the background of the founder of cryptocurrency exchange JPEX. Is JPEX safe?
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