Hong Kong may further empower regulators to tackle crypto scams: John Lee

Hong Kong authorities may further empower regulators to tackle cryptocurrency scams, the city’s leader has said, after a watchdog was unable to close the unlicensed platform at the centre of an alleged HK$148 million (US$19 million) fraud.

Chief Executive John Lee Ka-chiu on Tuesday said his administration would review the relevant legislation, a day after lawmakers criticised the Securities and Futures Commission (SFC) over its handling of the case and called for the government to close legal loopholes.

“If any of our laws in this area need to be strengthened, or if the transparency of the information we release has room for improvement, we will actively consider it,” he said before his weekly Executive Council meeting. “I will also ask the relevant bureaus and departments to move forward in these areas.”

Hongkongers who lost HK$148 million in crypto scam say public warning came too late

Lee said the government would look into giving more powers to regulators if needed, adding that the SFC would consider what current measures it could take, such as using laws targeting money laundering.

Police on Monday said 145 residents claimed to have lost about HK$148 million after being asked to invest in cryptocurrency platform Hounax, following an investigation that began on Saturday.

Lawmakers slammed legal loopholes that prevented the watchdog from taking enforcement action against unlicensed platforms, and accused the regulator of taking too long to warn the public.

The SFC dismissed suggestions that the latest incident reflected “significant shortcomings” in its monitoring work and said it needed time to investigate cases.

“The platform is unregulated and not licensed with the SFC,” a spokesman for the regulator said. “As such, the SFC does not have the power to cease its operation.”

Lee said the public should only trade on licensed platforms, and authorities must deliver information in a fast and transparent manner. Investor education also needed to be strengthened, he added.

“I want to emphasise that we should use all the methods available to protect the interests of investors, as well as combat any platforms or websites that are unlicensed, illegal or have scam elements,” he said.

Hounax platform allegedly scams 131 Hongkongers out of nearly HK$120 million

The latest case follows the scandal centred on the JPEX cryptocurrency exchange, involving more than 2,500 alleged victims and over HK$1.5 billion in losses.

The scandal, which erupted in September, is the single largest financial fraud case in the city’s history, exposing flaws in the regulatory regime amid a push to transform Hong Kong into a virtual asset hub.

Police said they did find any links between the alleged scam involving Hounax and the JPEX case.

Hounax, which started operating this year and appeared to target local investors, claimed it was run by a Singaporean company.