The Hong Kong Securities and Futures Commission "names" two virtual asset trading platforms suspected of fraudulent activities

China Fund Reporter Ivan

Two more entities have been "named" by the Hong Kong Securities and Futures Commission (SFC) for suspected fraud related to virtual assets!

On the evening of January 18, the SFC issued a notice warning the public to be cautious of two entities claiming to be virtual asset trading platforms. The entities operate under the names "Aramex" and "DIFX."

Notably, this is the second warning issued by the SFC in the past month regarding entities suspected of virtual asset-related fraud.

(Source: SFC website)

Warning the Public to Be Vigilant

"Too Good to Be True" Investment Opportunities

The SFC's announcement revealed that it has been exchanging intelligence with the police through a joint task force monitoring and investigating illegal activities related to virtual asset trading platforms.

Regarding Aramex, the SFC pointed out that the name used by Aramex is very similar to that of a logistics company listed on the Dubai Financial Market, but there is no indication that the two are related.

According to the announcement, Aramex pretends to offer free investment advice to lure victims into joining social media chat groups. Within these chat groups, individuals claiming to be investment experts promote the website operated by Aramex to victims interested in investing in cryptocurrencies. Victims are then asked to deposit funds into designated bank accounts for investment purposes, but they are subsequently unable to withdraw their funds.

As for DIFX, the announcement noted that its name is very similar to that of another cryptocurrency exchange, but there is no indication that the two are related.

The announcement stated that DIFX uses similar tactics to Aramex, enticing investors on instant messaging platforms through individuals falsely claiming to be investment experts, and promoting the website operated by DIFX to unsuspecting investors. Similar to the case of Aramex, victims are asked to deposit funds into designated bank accounts but are unable to withdraw their funds afterward.

The SFC stated that on January 18, 2024, it added Aramex, DIFX, and their respective websites to the list of suspicious virtual asset trading platforms. It further added that although the police have taken action to block the identifiable websites of the two entities, the public should be wary of their potential continued establishment of similarly named websites.

The SFC once again reminds the public to be cautious of "too good to be true" investment opportunities and advice shared on social media platforms and instant messaging software. The public should also be aware that some fraudulent unlicensed platforms may occasionally use names similar to legitimate entities to confuse investors. Therefore, investors should remain vigilant against fraud when making investment decisions.

SFC's "Suspicious Virtual Asset Trading Platforms"

Number of Warning Entities Increased to 13

The SFC's website shows that as of now, the number of "suspicious virtual asset trading platforms" it has announced has increased to 13, with the earliest being OSL, which was added on November 18, 2021.

(Source: SFC website)

The SFC stated that certain virtual asset trading platforms appear to operate in Hong Kong or target Hong Kong investors but are not licensed to provide virtual asset services or conduct regulated activities in Hong Kong. These platforms may lure investors with astonishing investment opportunities, falsely claiming to have already obtained or will soon obtain licenses locally and/or overseas, and even promote themselves extensively through social media, instant messaging software, so-called key opinion leaders (KOLs), or other advertising media.

The SFC reminds the public that if they use unlicensed virtual asset trading platforms for transactions, they must understand that these unregulated platforms are not supervised by the SFC. If the relevant platform ceases operations, goes bankrupt, is hacked, or its assets are misappropriated, investors may lose all investments held on that platform. Investors may find it difficult to seek recourse from virtual asset trading platforms with no connection to Hong Kong and may also be unable to obtain compensation through legal means.

In June 2023, Hong Kong released new regulations for virtual asset trading platforms and issued the first batch of licenses for virtual asset trading platforms in August of the same year. Meanwhile, the SFC continues to crack down on illegal activities related to virtual asset trading.

Following the collapse of the JPEX platform in September 2023, the Hong Kong government has tightened regulations on virtual asset trading platforms. Currently, the SFC has established a dedicated task force with the Hong Kong Police Force to enhance cooperation in monitoring and investigating illegal activities related to virtual asset trading platforms.

In addition to regulating virtual asset trading platforms, the Hong Kong government has also announced plans to regulate over-the-counter (OTC) cryptocurrency dealers involved in the widespread JPEX case. The Secretary for Financial Services and the Treasury, Christopher Hui, stated last October that Hong Kong is planning to revise the regulations governing virtual asset OTC operations and establish relevant regulatory arrangements, although no timeline for the introduction of OTC regulations has been disclosed.