Crypto scammers ready ‘tools from science fiction’ to fleece investors, warns Hong Kong regulator

For all the cunning we’ve seen in crypto scams, it may be about to get a whole lot worse.

That was the message delivered by Christopher Wilson, the executive director of enforcement at the Securities and Futures Commission in Hong Kong, during a compliance symposium this week in the city.

“A cornucopia of tools straight from science fiction movies is conspiring to make the most vigilant of us fall prey to increasingly sophisticated scams,” Wilson warned during the ALB Pan Asian Regulatory and Anti-Corruption Compliance Summit 2024.

Those include deep fakes and AI, Wilson said. And the growth of cryptocurrencies is providing criminals with new ways to fleece unwitting consumers and investors, he said.

“The majority of virtual asset investors are driven by potential or perceived short-term gains,” Wilson said. “This highlights the importance of our education campaigns and the vigilant monitoring of social media scams.”

Race to educate

The SFC has come under mounting pressure to crack down on phantom crypto exchanges that disappear with millions of dollars in deposits. The agency started listing suspicious platforms on its website and formed a working group with Hong Kong police.

Officials also rolled out a public education campaign. The Kowloon metro station sports two scam warnings side by side: one was the SFC’s standard poster about using unlicensed platforms, the other was a Hong Kong Monetary Authority boss rapping about phone scams with a popular local singer.

Meanwhile, the authorities are working with their counterparts in Cambodia, Myanmar and the Philippines to root out organised crime compounds where the online swindles originate.

On March 14, hundreds of people were arrested at a scam compound in the Philippines following a tip from someone who had escaped the facility. Cambodian officials arrested more than 450 people in a raid in Sihanoukville on March 9 and 10.

More Asia News: Bybit, MEXC join Hong Kong’s suspicious platforms list

Speaking of the suspicious virtual asset platform list, it grows ever longer.

Among the two recent additions are MEXC and Bybit, which were added on March 15 and 14, respectively.

In Bybit’s case, the warning refers only to Bybit Fintech Limited, a Seychelles-based company, which offers products like futures contracts for crypto that are not permitted in Hong Kong. It doesn’t include ByBit’s Hong Kong entity, Spark Fintech Limited, which has applied for a licence in Hong Kong.

The SFC also accused MEXC of ‘actively promoting its services to Hong Kong investors’ despite neither having a licence or applying for one.

A Bybit spokesperson told DL News that the company was committed to providing a safe and secure trading environment for users consistent with both international and local standards, and strived to comply with all applicable laws and regulations in the regions in which it operates.

The SFC also accused MEXC of “actively promoting its services to Hong Kong investors” despite neither having a licence or applying for one.

In February, it also warned against a platform with the same name that MEXC said was “a counterfeit version of the MEXC cryptocurrency exchange platform’s website, and not the official MEXC exchange itself.”

MEXC did not respond to a request for comment.

Missing CEO

That said, there’s frustration among victims that the list often adds entities only after the damage is done.

Take BitForex. Nobody seems to know where the former CEO Jason Luo is — and if they do they’re not saying — or who moved $57 million in funds off the platform.

ByBit was only added to the suspicious platform list after its coffers were emptied in late February.

Not much help to those whose money is now inaccessible to them,

Quick Bites

• The Hong Kong Monetary Authority launched phase 2 of its e-HKD pilot program this week. It follows on from its initial pilot in October 2023 that looked at domestic retail use cases including programmable payments, settlement of tokenised assets, and offline payments.
• China really wants to make its CBDC happen. I headed to Guangzhou, one of the areas that’s part of a pilot rollout, to give it a try.
• I also went to Taiwan for ETH Taipei and learned about Vitalik Buterin’s eating habits. But he didn’t want to talk about reports the SEC is looking into the Ethereum Foundation.
• Hong Kong police confirmed to DL News last week they are “looking into” what happened to BitForex.
• I will also be at the WOW Summit next week here in Hong Kong (along with my bottle of support baijiu). Come say hi!

Callan Quinn is DL News’ Hong Kong-based Asia Correspondent. Get in touch at callan@dlnews.com.