Hong Kong police round up crypto influencers in hunt for ‘fraud syndicate’ at heart of JPEX

Last Sunday, a 28-year-old man disembarked from a flight at Hong Kong International Airport and was promptly arrested.

He was Henry Choi, a crypto social media influencer with 21,000 instagram followers and just over 19,000 YouTube subscribers, he later confirmed in a statement. And his arrest was the 28th Hong Kong police have made since it launched its investigation into the cryptocurrency exchange platform JPEX last month.

It was also the latest sign that JPEX attracted users by tapping the promotional chops of influencers like Choi, and their connection to the numerous cryptocurrency shops in Hong Kong.

Sophisticated enterprise

As the police press forward with their investigation, a picture is emerging of a sophisticated enterprise operating on three continents.

JPEX had registered businesses in the US, Canada, Lithuania and Australia, business registries show. It claimed to be based in Dubai, although the emirate’s Virtual Assets Regulation Authority has confirmed JPEX was not regulated there.

A unit in the US that is listed as the registered agent of JPEX has been linked to investment scam platforms used for pig butchering as well as other, smaller cryptocurrency exchanges.

Back in Hong Kong, police have received more than 2,400 complaints related to the platform and estimate losses at around HK$1.43 billion, or about $199 million. The authorities have not charged Choi or any of those arrested in the probe so far.

In a statement on Hong Coin’s Instagram, he said he was fully cooperating with the police and slammed rumours that he was one of the “behind-the-scenes masterminds” of JPEX.

“I once again clarify that I have not received any money, nor have I participated in the JPEX harvesting incident. I have no knowledge of it at all,” he said, adding that he had lost 95% of his own funds in the incident.

Fraud syndicate

While police investigators have yet to identify the founders or directors of JPEX, last week they said they were getting closer to identifying the “fraud syndicate” they suspect is behind the exchange.

And yet hanging over the JPEX probe is a key question: Why are so many influencers who own OTC shops linked to JPEX?

For its part, JPEX has called the allegations it is suspected of wrongdoing “unfair.” On October 4, the exchange, which continues to operate online, said its users had voted to convert into a DAO, a move that will forestall paying back deposits for two years.

Choi is associated with two projects: Hong Coin and TungClub. On his posts promoting them, he is often seen sporting a white suit that clashes with his shoulder-length curly black hair. Hong Coin offers courses in investment strategies. A recent futures course promised to teach students the ins and outs of investing for a payment of HK$6,888 (US$880).

FTX leveraged star power from superstar NFL quarterback Tom Brady and comedian Larry David in its Super Bowl spots. Less is said about the constant shilling of random crypto products on platforms such as TikTok, Instagram, and YouTube, where for a few thousand dollars crypto companies can get a shoutout from a minor influencer.

OTCs in Central

None of the influencers linked to JPEX are as big as YouTube star Mr Beast. Perhaps the most prominent is Joseph Lam, an Oxford-educated lawyer who was fired from a job at an insurance firm earlier this year for mocking murder victims on social media, according to a post the company placed on its Facebook page.

He was taken into custody on September 18 a few days after law enforcement authorities announced their JPEX probe.

Lam, who formerly endorsed JPEX online and claimed to have sought a partnership with the company, is the owner of an OTC shop located in Central, Hong Kong’s bustling commercial district. In a press conference on September 22, Lam said he had cut ties with JPEX and closed his company.

Lam has not been charged with a crime. (In contrast to the US legal system, Hong Kong, like the UK, is one of many jurisdictions that may arrest suspects without pressing charges.)

Following his arrest, Lam’s Instagram — he has 134,000 followers — was temporarily deleted. “I cannot say too much and cannot reveal details of the case under investigation, but I am very sorry,” he said in his latest post on September 27.

Chan Yee is a Youtuber with 221,000 subscribers who was also detained in the first round of police arrests alongside Lam.

Playlist

Both were released September 26. Chan then posted a 19 minute video on YouTube recounting her experience in detention. She found the food subpar and the toilet unpleasant.

She’s been described as an investment YouTuber but her content is much broader than that. She regularly discusses topics such as religion, romantic relationships, and China-Hong Kong relations.

In addition, her page has a playlist of videos called a “cryptocurrency Bitcoin investment guide.” In a video published nine months ago, she instructs viewers on how to stake JPP, the native token used by JPEX. Chan claimed it would be the next coin to multiply in value by 100 times.

Like Lam, Chan also ran an OTC trading shop based in Tsim Sha Tsui which she advertised to users on her channel.

Chu Ka-fai’s has 13,600 followers on Instagram and about 6,000 YouTube subscribers. In his most recent video in February he provides tips on raising a leopard gecko featuring his own pet gecko, Dada.

In the past, he’s used both accounts to promote KT Club, an OTC trading shop with three branches in Hong Kong. Its Instagram account describes it as a 24/7 crypto trading platform with “safe and reliable” in-store services.

KT Club’s former company secretary also held the same position at another OTC exchange, Coingaroo. It’s not clear why so many influencers chose to set up exchanges and there have been media reports citing anonymous sources that JPEX offered subsidies including paying rent to its partner shops.

Not regulated

Other prominent figures, such as actor and singer Julian Cheung, Malaysian actress Jacqueline Ch’ng, and feng shui master Clement Chan, were also questioned by police about JPEX but not detained.

Police have also raided OTC crypto shops across Hong Kong as part of the JPEX sweep. Colourful and extravagant, the existence of these shops has been a bit of a mystery — they’re not regulated and authorities themselves have admitted they don’t know how many they are.

They regularly advertise on public transport in the city — Coingaroo is still on the side of mini-buses in Kowloon — and hold events for Hongkongers to learn more about crypto trading.

Got a story about crypto and blockchain in China? Contact me at callan@dlnews.com