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JPEX scandal masterminds still at large as 11 suspects taken into custody: Report

Hong Kong police said the leaders of the JPEX crypto exchange are still at large and are now enlisting the help of Interpol to track them down.

The masterminds behind Hong Kong’s JPEX alleged crypto exchange scandal — referred to by some as the largest financial fraud to ever hit the city — have eluded authorities despite 11 people already being taken in for questioning in relation to the case.

According to a Sept. 23 report from the South China Morning Post, police have now received more than 2,265 complaints from victims of the exchange, with the total monetary value of the fallout estimated to be in the vicinity of $178 million (1.4 billion Hong Kong dollars).

The complaints appear to be related to difficulties withdrawing cryptocurrency from the platform. On Sept. 15, the JPEX exchange raised its withdrawal fees to 999 USDT.

So far, the list of people reportedly taken into custody for questioning includes crypto influencer Joseph Lam Chok, who has made numerous attempts to publicly distance himself from the exchange.

Police have also arrested three employees of the JPEX Technical Support Company, along with two YouTubers, Chan Wing-yee and Chu Ka-fai — who have a combined following of more than 200,000 — in relation to the scandal.

Others sought or taken in for questioning include the company's sole director Kwok Ho-lun, a restaurant director, and three celebrities who had reportedly promoted JPEX in some form in the pa. 

Hong Kong’s authorities however said the ringleaders of the operation are still on the run. Police added that the investigation was continuing and further arrests were likely in the near future.

Local police have also reportedly enlisted the help of Interpol and other international enforcement agencies after it identified suspicious crypto transfers being made from the JPEX exchange. Police has also requested that local telecommunications providers block access to the exchange’s website.

During the Token2049 conference in Singapore on Sept. 13, the JPEX team allegedly abandoned its corporate booth after Hong Kong police arrested six employees on charges of fraud for operating an unlicensed crypto exchange.

Related: Troubled crypto exchange JPEX applies for deregistration in Australia

The JPEX scandal first appeared on the radar on Sept. 13 when Hong Kong’s financial regulator notified the public that it had received over 1,000 complaints about the unregistered crypto exchange platform, with claims of losses amounting to over $128 million (HK$1 billion).

The exchange later shuttered a number of its yield-bearing products, and ratcheted up its withdrawal fees to 999 USDT, while blaming its third-party market-makers for “maliciously” freezing liquidity.

At the time, it claimed that it had attempted to register with the relevant authorities and cited “unfair” treatment from the SFC.

In a Sept. 20 statement, the SFC revealed that JPEX had been operating without a license for virtual asset trading.

According to the official website, JPEX purports to be headquartered in Dubai and claims to be licensed for crypto trading activities in the United States, Canada and Australia. Founded in 2020, JPEX claimed to oversee some $2 billion in assets and said its goal was to be included in the world’s top five crypto exchanges.

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JPEX blames partners for ‘maliciously’ freezing funds, causing liquidity crisis

Crypto exchange JPEX has pointed the finger at its third-party market makers for “maliciously” freezing funds which led to the exchange being forced to hike withdrawal fees to battle a liquidity crisis.

Dubai-based cryptocurrency exchange JPEX has slammed regulators and “third-party market makers” for a liquidity crisis that has seen the platform hike withdrawal fees and suspend certain operations. 

In a Sept. 17 blog post, JPEX said “unfair treatment” from certain institutions in Hong Kong, along with negative news — caused its third-party market makers to “maliciously” freeze funds.

“They demanded more information from the platform for negotiation, restricting our liquidity and significantly increasing our daily operating costs, leading to operational difficulties.”

Blaming the liquidity crisis, JPEX announced that all operations affiliated with its Earn product would be “delisted” by Sept. 18. Users will no longer be able to place any new Earn orders and existing Earn orders will only continue until the product end date, it said.

Regular spot trading activity appears to remain functional at the time of publication, however, JPEX users are alleging that the platform is currently charging a 999 Tether (USDT) fee for withdrawals, on a maximum amount of 1,000 USDT.

JPEX did not specifically address the high withdrawal fee but pledged to gradually adjust the withdrawal fees "back to normal levels" after it finishes negotiations with the third-party market makers.

“We promise to recover liquidity from third-party market makers as soon as possible and gradually adjust the withdrawal fees back to normal levels,” JPEX said in a statement, noting the details will be announced after negotiations conclude.

In addition to shuttering its Earn product, JPEX announced that it would be using a decentralized autonomous organization (DAO) to collect suggestions regarding its restructuring from users.

Cointelegraph contacted JPEX but did not receive a response by the time of publication.

Related: Hong Kong central bank warns against crypto firms using banking terms

On Sept. 13, the Hong Kong Securities and Futures Commission (FSC) issued a warning against JPEX for allegedly promoting its services to Hong Kong residents despite not having applied for a license in the country.

In a statement, the SFC wrote that it had observed a “number of suspicious features” concerning the practices of JPEX, including offering very high returns and other discrepancies in how it had marketed itself to the Hong Kong public despite being unlicensed.

An attendee of the Token 2049 conference in Singapore claimed that the JPEX booth at the event had been abandoned the day after the FSC issued its warning.

Local police in Hong Kong have now received at least 83 complaints concerning the exchange, according to a Sept. 18 report from the South China Morning Post.

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