Hacks & Frauds 2 min, 42 sec READ

by Mike Dalton

The Hong Kong-based exchange JPEX has gained notoriety in recent weeks. Here’s why the exchange is experiencing difficulties.

JPEX has been targeted by regulators since mid-September. Though the crypto exchange has not completely collapsed, it has greatly reduced its operations, and several connected individuals have been arrested. Here's what has happened so far.

Week 1: Regulatory Issues Begin

Sept. 12: Hong Kong's Securities and Futures Commission (SFC) issues a warning in which it claims that JPEX is operating and promoting services despite being unregistered. SFC states that, among other issues, it has received complaints from JPEX customers about failed withdrawals and altered balances.

Sept 13: JPEX acknowledges the complaint but only addresses its licensing failure, stating that it has attempted to comply with the relevant regulations since February.

Sept. 14: JPEX further responds to the regulatory complaint by raising withdrawal fees. Reports from users suggest that the company has raised Tether withdrawal fees to 999 USDT per 1000 USDT, seemingly imposing a de facto block on certain withdrawals. JPEX also announces an emergency withdrawal process at this time.

Sept. 15: JPEX suspends its “game lobby” but says it will otherwise continue to operate. JPEX provides reassurance, writing: "We believe that the platform will not collapse."

Sept. 16: The exchange says that it is processing withdrawal requests.

Sept. 17: JPEX says that its third-party market makers have frozen funds. As a result, it delists transactions on its interest-bearing Earn service.

Week 2: Reports of Arrests Surface

Sept. 18: Hong Kong police arrest Influencer Joseph Lam Chok ("jolamchok”) for his involvement with JPEX. Five other individuals are also arrested.

Sept. 20: JPEX states that telecom providers in Hong Kong have blocked access to its mobile app and website at the request of the SFC. Separate from this development, JPEX also applies to deregister its company in Australia.

Sept. 21: JPEX announces that, following a referendum, it aims to transform into a decentralized autonomous organization (DAO) in order to avoid regulatory restrictions.

Sept. 21: Telecom services block phone and SMS messages from JPEX, preventing some users from logging in. JPEX implements an alternate verification method.

Sept. 23: Reports suggest that eleven individuals have now been arrested in connection with JPEX, though its leaders remain free. Users have now filed 2,265 complaints, and $178 million USD has been affected by the scandal.

Week 3: JPEX Stops Accepting Funds

Sept. 24: JPEX tells Hong Kong users to temporarily stop depositing new funds.

Sept. 25: Hong Kong’s SFC says that it will maintain a list of suspicious virtual asset trading platforms (VATPs), noting that the JPEX incident highlights new risks.

Sept. 27: Reports suggest that police have recovered $11 million of assets linked to JPEX and have arrested 12 individuals in total.

Sept. 28: JPEX’s referendum on whether to transform into a DAO reaches its conclusion. Earlier results indicate that voters were 68% in favor of the plan.

Sept. 29: Police in Hong Kong and Macao arrest four more individuals linked to JPEX. Reports suggest that 18 individuals have now been arrested and that $2.8 million has been seized in total. Two individuals arrested in Macao are later released on bail.

It appears that the situation is far from over, as regulators may take action further against JPEX, and the exchange may further reduce its operations. However, as of Oct. 3, no other significant developments have occurred.