- Hong Kong Secretary for Security Chris Tang said locating the leaders of JPEX is a major part of police efforts to investigate the exchange.
- Clues point to Dubai and abroad as possible locales.
- Tang said Hong Kong will work with foreign law enforcement authorities to apprehend leaders abroad if they can be identified.
Hong Kong Secretary for Security Chris Tang vowed Wednesday to locate the leaders of JPEX, the crypto exchange that has become the target of police fraud investigation.
There’s only one catch — no one, it appears, knows who they are.
Heavy losses
Over the last two weeks, the Hong Kong Police Force arrested around a dozen employees and influencers who promoted the platform and suspected employees.
About 2,400 investors have reported losses to the police of HK$1.5 billion (US$192 million).
Police are investigating whether JPEX committed fraud by falsely claiming to be a licensed exchange. In a press conference on Wednesday, Tang vowed to “hold the culprits accountable for their crimes.”
Tang, the former commissioner of police in Hong Kong, also said authorities will pursue them overseas.
“We have a mechanism that requests foreign law enforcement agencies to assist in the investigation if needed,” he said.
Yet in the flurry of law enforcement action, there’s been a noticeable dearth of information about the people actually running the exchange.
Not your typical corporation
On its website, JPEX itself says it transcends “traditional frameworks and hierarchies.”
“We are not your typical corporation with a designated CEO. Instead, we are a Decentralized Autonomous Organization (DAO), a collective wherein every member contributes to our operations and decisions,” it said.
DL News has spoken with more than a dozen people who have been active in Hong Kong’s crypto scene over the years. It’s a small community in which everyone knows everyone.
And yet no one said they have ever met the JPEX founders or anyone who worked with them.
Even so, Tang said police are “doing their best” to locate the leader of the cryptocurrency exchange. But it’s not clear if the founders are even based in Hong Kong.
The South China Morning Post suggested on September 23 they had fled and were on the run.
JPEX says on its website that it is based in Dubai.
On social media, the venture advertised that it was “registered” in the US, Canada, Lithuania and Australia. Each entity operates under a different name in local business registries and it’s not clear what connection the people on the documents have with the exchange.
The company in Australia appears to have applied for deregistration following the investigation
The registrations in different jurisdictions appear to have been used to establish legitimacy for the exchange, a tactic that is not uncommon in cryptocurrency platforms that often come under law enforcement scrutiny.
In August 2022, Dirty Bubble Media, a Substack post, listed JPEX among a cluster of exchanges linked to a Colorado-based company called Zhongteng Accounting that it linked to crypto scammers operating out of Southeast Asia.
Zhongteng has also been listed as the registered agent for platforms created by crypto romance scam perpetrators, according to online databases maintained by Open Corporates and the Global Anti-scam Organisation, a group that combats online crypto fraud.
Money business licence
JPEX did have a Money Business Services licence from the Financial Crimes Enforcement Network, an arm of the US Treasury Department known as FinCEN. Under the name JP-EX Crypto Asset Bank, it used Zhongteng as its registered agent, according to Open Corporates.
FinCEN states registration is not a “recommendation, certification of legitimacy, or endorsement of the business by any government agency.”
Nevertheless, JPEX showcased the registration in its promotions. “JPEX is a professional virtual currency platform recognized by FinCEN in the United States and a trusted and regulated virtual currency platform” the company stated on its website.
Meanwhile, the JPEX case has exploded in Hong Kong just as the semi-autonomous metropolis was labouring to revive its reputation as Asia’s go-to crypto hub.
In addition to Hong Kong-based employees and influencers, police have also arrested the owners of OTC cryptocurrency exchange shops who are believed to have entered into partnerships with JPEX.
Asset seizure
Police have seized over HK$8 million in cash and assets worth HK$77 million — including cryptocurrency — from raids on businesses and private homes.
Regulators are scrambling to get out in front of the case. This week, Hong Kong’s Chief Executive John Lee promised to improve public education about investment in crypto.
And the Securities and Futures Commission, the city’s finance watchdog, said it plans to start listing exchanges that have applied to be licenced in Hong Kong – despite baulking last week at doing so.
Got a tip about crypto in Asia? Contact me at callan@dlnews.com
