Recently, I reviewed the sensational JPEX incident in Hong Kong, and the more I looked into it, the more I felt this case is worth deep reflection for all investors.

Speaking of which, this event, known as Hong Kong’s largest crypto industry collapse in history, began with the SFC issuing warnings in September 2023, and in just two years, it evolved into a major case with 80 arrests, over 2,700 investors harmed, and losses exceeding HKD 1.6 billion. I noticed that the entire development of the JPEX incident actually clearly illustrates the underlying issues.

The platform itself was established in 2020, claiming to be a globally oriented digital asset exchange, heavily advertising across Hong Kong. There were promotions everywhere—subway stations, buses, shopping malls—some ads even claimed to be a “Japanese cryptocurrency exchange.” The most attractive product was their Earn program, promising annualized returns of 20% for BTC and 21% for ETH. Such promises of “low risk and high returns” indeed tempted many.

But here’s the problem. After investigation, the SFC found that these so-called “licenses” were fundamentally invalid. The financial licenses from the US, Canada, Australia, and Dubai only covered foreign exchange trading, and could not support virtual asset trading at all. The platform promoted heavily through KOLs and OTC shops, creating a false appearance of compliance.

Starting in July 2023, mainland Chinese users began reporting withdrawal difficulties. I saw many complaints on Hong Kong’s LIHKG forum at the time, saying the platform lured victims to Hong Kong to “resolve funds,” only to be ambushed and beaten. Such incidents spread rapidly, triggering rumors of a collapse, and the situation started spiraling out of control.

On September 13, the SFC issued an official warning statement, directly accusing JPEX of operating without a license. The platform’s response was even more outrageous—rather than admitting fault, they accused the SFC of “unfair suppression.” After this response, the number of complaints skyrocketed from a few hundred to over 1,600. By September 17, the platform announced withdrawal freezes, with USDT withdrawal fees jumping from 10 to 999 (the maximum being 1,000), effectively allowing users to withdraw only 1 USDT. This move was widely condemned as “freezing assets in fact.”

Five days after the SFC warning, police launched a raid codenamed “Iron Gate Operation,” arresting the first eight individuals, including KOL Lin Zuo, who had 150k followers. He was accused of falsely claiming on Instagram that the platform was “safe and licensed,” luring investors to deposit assets. Over the following months, arrests continued, involving core JPEX members, OTC managers, promotional KOLs, and multiple levels of personnel.

By November 2025, Hong Kong police formally charged 16 people, marking the first official prosecution in the two-year JPEX case. At the same time, INTERPOL issued red notices for three masterminds who had fled overseas. The assets frozen by police totaled HKD 228 million, including cash, gold bars, luxury cars, and virtual assets.

What I find most cautionary about this case is the systemic risk posed by unlicensed platforms and false advertising. Those KOLs may look glamorous and have many followers, but they often did not conduct proper due diligence on the platform’s credentials before promoting. Promises of high returns, fake licenses, and carefully crafted “safe and easy-to-use” images all became tools for deceiving investors.

This JPEX incident also pushed Hong Kong’s virtual asset regulation into a new phase. The VATP licensing system introduced in June 2023 required all platforms to obtain SFC approval. But JPEX chose to ignore the regulations, ultimately paying a painful price.

For investors, the lesson is clear: be cautious of high-return promises, stay far from unlicensed platforms, and do your own homework on KOL recommendations. Choosing licensed exchanges and understanding regulatory credentials are the right ways to protect yourself.