JPEX Fraud Case Sees Hong Kong Court Rule in Favor of Investors

A Hong Kong court sided with two investors in a civil lawsuit against the now-defunct cryptocurrency exchange JPEX and a related Hong Kong entity, marking a new development in a major alleged financial fraud case.

District Court Judge Grace Chow Chiu-man issued a declaratory judgment for the plaintiffs, Herbert Lee Sung-him and Chan Wing-yan, precluding a trial. The judge mandated the recovery of HK$1.85 million (US$238,000), equivalent to 247,000 USDT, on their behalf.

The legal action stemmed from the plaintiffs’ June lawsuit against Dubai-based JPEX, Web3 Technical Support, and other parties. The lawsuit alleges that Chan transferred USDT to JPEX wallets in July and August 2023, with one transfer linked to a third party named Lam. The cryptocurrency promptly vanished from their wallets, leaving them unable to retrieve it.

JPEX Fraud: A Landmark Case in Hong Kong

Neither JPEX nor a representative from Web3 Technical Support attended the hearing.

“As for the injunction sought against D2 [Web3 Technical Support], I am also satisfied that it is necessary and ancillary to assist in the recovery of the USDT Deposits, which I have held on the Ps’ [plaintiffs’] pleaded case were held on trust by D2 (together with D1 [JPEX]) for P1 [Chan],” Judge Chow stated.

Web3 Technical Support also faces approximately $15,400 in court costs. The plaintiffs’ legal representative, Joshua Chu Kiu-wah, informed the South China Morning Post of their intention to pursue enforcement action to retrieve the frozen funds held by police.

JPEX and the Hong Kong Regulatory Landscape

The JPEX fraud case originated in September 2023 when the Hong Kong Securities and Futures Commission warned that JPEX operated without a license.

Subsequent to the warning, Hong Kong police received over 2,200 complaints regarding JPEX, leading to multiple arrests, including influencers and celebrities who promoted the exchange.

JPEX allegedly implemented exorbitant withdrawal fees to retain customers and attempted to transition into a decentralized autonomous organization (DAO), converting user funds into “DAO shareholder dividends.”

Repercussions of the JPEX Fraud in Hong Kong

An estimated 2,600 victims have collectively lost approximately $206 million in the JPEX fraud. The initial legal victory for investors could potentially influence future court actions, impacting the regulatory approach to cryptocurrency exchanges within Hong Kong.

Further legal proceedings related to this case are anticipated.