As Hong Kong opens its arms to crypto, it’s also shutting down those it says aren’t obeying new regulations for the sector.
Hong Kong police on Monday arrested crypto influencer Joseph Lam and five others over an alleged “conspiracy to defraud” investors, according to the Wall Street Journal.
Lam was a promoter of the crypto exchange JPEX, which was publicly admonished last week by the Hong Kong’s version of the SEC, the Securities and Futures Commission, or SFC. Lam said he has incurred large financial losses and is cooperating with the police.
The Hong Kong securities regulator had issued a warning about JPEX using influencers and social media to advertise to Hong Kong clients despite not having a license to operate in the city.
Similar to other now-bankrupt crypto companies in the U.S., such as Voyager Digital and Celsius, JPEX offered high yields—in this case, up to 21%—to customers.
“The SFC takes this opportunity to warn investors to be cautious about investment opportunities that seem too good to be true,” the agency wrote in its JPEX warning statement.
The leader of Hong Kong, Chief Executive John Lee Ka-chiu, said at a press conference Monday that he was concerned over JPEX’s behavior and that it highlighted the need for proper crypto regulations.
“The licensing regime that has been introduced is exactly for that purpose—that is, to protect investors,” he said.
John Lee: The JPEX incident reflects the necessity for a proper regulatory system. The current system is designed to protect investors. pic.twitter.com/Nl2o2Dy2u6
— Aaron Busch (@tripperhead) September 19, 2023
Although crypto trading is still officially banned in mainland China, Hong Kong has increasingly warmed to the industry. In June, the city launched a new licensing system and gave the green light to some crypto trading under the new plan. Hong Kong regulators have even gone so far as to encourage banks to add crypto exchanges as clients.