Hong Kong’s securities watchdog, the Securities and Futures Commission (SFC), took swift and decisive action against two alleged cryptocurrency scam websites — BitCuped and HongKongDAO. The director of enforcement, Damon Cheng Tak-ka, announced the blocklisting and blocking of these sites. The sites were suspected of orchestrating scams that reportedly led to losses exceeding HK$1.6 billion.
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The Cryptocurrency Deception Duo: BitCuped and HongKongDAO
The SFC received a tip-off that revealed HongKongDAO is peddling a digital token named “HKD” while falsely claiming to have applied for operating licences from the commission and the government. Cheng revealed the claims were fraudulent, prompting the SFC to swiftly place the website on its alert list on November 24.
Collaborating with the police, the SFC took action by blocking the website and issuing cease and desist letters to trading platforms involved with HongKongDAO.
BitCuped, on the other hand, was exposed for falsely associating itself with prominent figures. The website listed the chairman and CEO of Hong Kong Exchanges and Clearing (HKEX) as its own, claiming ‘Laura Cha’ and ‘Nicolas Aguzin’ as its chair and CEO, respectively. Cheng clarified that neither Cha nor Aguzin had any connection to BitCuped. Consequently, the website was blocklisted on the SFC website on November 10.
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Exploiting Names and Online Platforms
Lawmaker Johnny Ng Kit-chong expressed concern about scammers adopting a new trend of using well-known individuals’ names to deceive investors. This revelation raises fears that unsuspecting foreign investors might fall prey to fake celebrity endorsements, assuming legitimacy based on the names associated with these platforms.
Keith Choy Chung-fai, the SFC’s interim head of intermediaries, cautioned the public about the evolving tactics of scammers who befriend victims on various online platforms and pose as investment experts or attractive personalities. These deceptive individuals lure victims into chats or classes and offer investment tips or insider trading information to scam them successfully.
Revisiting the Recent Past: Hounax and JPEX Scandals
The SFC’s recent actions come in the aftermath of a case in late November. One hundred and sixty-four residents reported about HK$159 million in losses after investing in the unregulated cryptocurrency platform Hounax. In this incident, the SFC admitted its inability to halt Hounax’s operation earlier due to regulatory limitations.
The JPEX cryptocurrency exchange scandal, which unfolded in September, also revealed flaws in Hong Kong’s regulatory system. With 2,629 alleged victims and losses exceeding HK$1.61 billion, the JPEX case formed the largest financial fraud in the city’s history. The SFC faced criticism for failing to promptly name JPEX in its initial warnings about the platform’s suspicious operations.
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The SFC’s Commitment to Action
Lawmaker Doreen Kong Yuk-foon suggested that the SFC’s action against BitCuped and HongKongDAO was not solely due to the false claims but also reflected lessons learned from past mistakes. She commended the SFC’s swift response, emphasising the public’s expectations for efficient measures to combat fraudulent activities.
The SFC’s interim head of intermediaries, Keith Choy Chung-fai, didn’t disclose specific details on progress in granting more powers to regulators. However, Keith assured citizens that the commission is using all available resources to investigate and enforce actions against fraudulent activities. The commitment to collaboration with the police in fraud cases remains a top priority.
The Growing Threat: Surge in Scams and Legislative Review
Recent statistics reveal a 52.5% surge in scams during the first nine months of the year, totalling 29,650 cases. The money lost to scams reached HK$4.99 billion, marking a 47.6% year-on-year increase. Online investment scams accounted for HK$2.13 billion in losses, making them the most prevalent form of fraud.
Chief Executive John Lee Ka-Chiu has promised a review of relevant legislation, considering additional powers for regulators, following criticism of the SFC’s handling of fraud cases and calls to close legal loopholes.
Meanwhile, the SFC is actively collaborating with the police to investigate the latest cases involving BitCuped and HongKongDAO. A police spokesman confirmed that the force received a referral from the SFC on November 29, and its commercial crime bureau is diligently following up on the matter. While authorities haven’t made any specific requests for assistance, the police remain vigilant in their pursuit of justice.
Insights and Concerns
Concerns have been raised about the potential development of new tactics by scammers, such as the false use of well-known individuals’ names. Lawmaker Johnny Ng Kit-chong expressed concerns about a trend where scammers falsely associate with celebrities to lure and deceive investors. This tactic could mislead foreign investors, who may fall into the trap of assuming legitimacy based on celebrity endorsements within the industry.
Keith Choy Chung-fai, the SFC’s interim head of intermediaries, urged the public to exercise caution when interacting online. Scammers are increasingly using platforms like Facebook, WeChat, WhatsApp, Telegram, and even Tinder to befriend victims. These scammers pretend to be investment gurus to lure individuals into joining chats or signing up for classes.
Safeguarding the Future of Cryptocurrency Investments
As Hong Kong grapples with the aftermath of cryptocurrency scams, the actions against BitCuped and HongKongDAO highlight the urgency of reinforcing regulatory frameworks. The SFC’s commitment to swift responses and collaboration with law enforcement is crucial to maintaining investor confidence.
Hong Kong’s journey toward becoming a virtual asset hub requires resilient defences to safeguard investors and uphold the integrity of the cryptocurrency market. Vigilance, education, and a proactive regulatory stance are vital to protect the future of cryptocurrency investments in the region.
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