Two people have lodged a civil claim against Hong Kong crypto exchange JPEX in a bid to recover more than HK$1.85 million, with a lawmaker saying 10 more plan to take similar action after falling victim to the city’s largest cryptocurrency scandal to date.
Chan Wing-yan and Herbert Lam lodged their case at District Court on Tuesday, making it the first civil lawsuit filed against the cryptocurrency platform at the heart of an alleged fraud case involving more than 2,600 victims with losses totalling HK$1.6 billion.
The pair filed a writ of summons against seven defendants including JP-EX Crypto Asset Platform and Web 3.0 Technical Support, two companies that had allegedly provided virtual asset services as JPEX in Hong Kong since 2021.
Virtual asset manager Felix Chiu of over-the-counter crypto exchange Coingaroo was also listed as a defendant alongside unidentified holders of three JPEX wallets.
According to the legal document, Chan registered two accounts with JPEX last July and August, and a third account in Herbert Lam’s name, after she attended seminars and read promotional materials by social media influencer Joseph Lam.
“[Chan] was led to believe that JPEX was a licensed, genuine and secure cryptocurrency exchange and investment platform,” the document said.
Joseph Lam claimed to be a partner of JPEX and was arrested over conspiracy to defraud last September. He has not been charged.
During that period, Chan transferred HK$850,000 and paid an additional HK$1 million in cash to Chiu for the corresponding amount of Tether cryptocurrency (USDT) into two JPEX wallets associated with her accounts.
She also transferred 6219.6 USDT (HK$48,575) from an account she held with another cryptocurrency platform to JPEX. The pair’s deposits into JPEX totalled 247,498 USDT (HK$1.93 million), according to the document.
The plaintiffs said they had not been able to withdraw their assets in their JPEX wallets since the platform imposed a 99 per cent withdrawal fee last September, when the Securities and Futures Commission identified JPEX as an unlicensed platform.
They later found the assets they held with JPEX had been transferred away “within five minutes after each of the deposits was being made… to many other wallets of unknown holders,” according to the document. Two accounts were left with zero balance, and the third was left with 0.01 USDT (HK$0.078).
The two plaintiffs also had no access to the “private key” to their JPEX wallets, a password that is used exclusively to manage crypto-assets, which were kept by the two companies, Chiu, or others whose identities were unknown, the document said.
The pair lodged three alternative claims, including one that sought to recover about 226,013 USDT that was said to have been converted into other cryptocurrencies without authorisation. The District Court handles claims of up to HK$3 million and could grant one of the three claims.
They also asked the court to trace and issue an injunction that prevents the defendants from dealing with the assets.
10 consider legal action
Lawmaker Johnny Ng said on Tuesday that 10 others who had lost money in the case were considering to take similar actions against JPEX, and that some had applied for legal aid.
Ng said the first civil lawsuit would encourage more victims to come forward, but those who had not invested extensively with JPEX might not lodge a case because of legal costs.
He urged police to expedite their investigations and authorities to strengthen regulations of virtual asset platforms, as well as step up public education.
Police told HKFP that 73 people had been arrested in relation to the JPEX scandal as of Monday. They were granted bail and required to report to the police regularly.
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