The Hong Kong authority has confirmed the arrest of Joseph Lam Chok, identified as a social media influencer for involvement in the crypto exchange JPEX. His arrest comes days after the Securities and Futures Commission (SFC) warned JPEX for operating without the requisite license.
Lam’s Monday arrest portrays SFC’s commitment to crack down on the unlicensed operators. Though trained in legal matters, the influencer commands a follower base estimated at hundreds of thousands on Instagram.
Social Media Influencer Arrested in Purge Against Investment Scam
The influencer, who previously worked as an insurance broker, was arrested alongside six other individuals linked with the embattled crypto exchange. A Monday, September 18 publication in the South China Morning Post revealed Lam’s arrest, alleging involvement in promoting the Dubai-based exchange regulators had earlier condemned for nonlicensed operations. The local news publication indicated the enforcement officers seized a laptop and cash as evidence of the violations.
Lam’s arrest came after JPEX announced suspending withdrawals, citing unfair targeting by the Hong Kong institutions. Although noncommittal on the institutions involved, JPEX’s reactions linked to the previous week’s statement issued by SFC.
Besides, the Dubai-based trading platform cited the negative news, eroding its reputation. Also, JPEX confirmed surprising development when it partnered with a third party in the market, making maliciously frozen funds.
The enforcement officers confirmed receiving over 80 complaints that JPEX denied users withdrawal of HK$34 million, translating to a $4.3M value of digital assets. By publication, The South China Morning Post report estimated the complaints are over 1000 with $12 million frozen.
Lam’s arrest came after the Friday, September 15, visit to the police to clarify his promotion relationship with JPEX. Also, his visit sought to recover the funds trapped in the trading platform. The Instagram-based influencer denied partnering with JPEX and admitted promoting the brand to his followers.
SFC Labels JPEX as Orchestrating Suspicious Activities
The arrest of Lam is linked to the statement issued by SFC, where the regulator alleged JPEX harbored suspicious features. The Thursday, September 14 communication by SFC illustrated that JPEX had actively promoted products and services by leveraging social media influencers, opinion leaders, and over-the-counter (OTC) shops.
SFC warned that JPEX misled the public by promoting misrepresented opportunities that were overly exaggerated. The move by the regulator prompted JPEX to indicate it would gradually restore the fees charged during withdrawal to normalcy. It promised to establish a dedicated withdrawal team to handle the emergency requests.
Lam’s arrest constitutes part of the push by Hong Kong’s authorities to crackdown on crypto-related scams. A June 12 report decried the spike in crypto-related fraud, where the citizens lost over $90 million in investment in scams by April 2023.
Securities Regulator Accuses JPEX of False Representation
The Securities regulator indicated that two JPEX-affiliated companies were on the alert list from July 2022. It alleged that the platform solicited investors without satisfying the licensure requirements.
The Commission further argued that the JPEX trading platform falsely represented it secured licenses from foreign regulators and that it would offer high returns on the savings products. The regulator decried the decision by JPEX to rely on misleading statements conveyed by the social media influencers it labeled as paid promoters.
The crackdown by SFC portrays devotion to enforcing the regulatory regime targeting non-compliant virtual assets and trading platforms (VATP). The regulator indicated that JPEX violated the obligation to apply for approval to offer exchanges serving retail customers within the 12-month grace period.
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