29th November 2023 – (Hong Kong) In a major blow to cryptocurrency investors in Hong Kong, the virtual asset exchange platform, Hounax, has been accused of defrauding citizens of more than HK$150 million (US$19.24 million). In an alleged cryptocurrency scam, the platform reportedly changed its web address more than 30 times to evade detection and continue its operations.
Hong Kong’s law enforcement agencies reported that a total of 158 residents have been deceived into investing through this unlicensed platform, resulting in cumulative losses of approximately HK$155 million. The Cybersecurity and Technology Crime Bureau, after identifying 32 websites linked to Hounax since October, has forwarded the information to pertinent authorities and organisations.
Authorities highlight the modus operandi of such scamsters, who frequently alter their website addresses to bypass warnings issued by law enforcement’s Scameter search engine and to evade police investigations. The Scameter, accessible through the CyberDefender website and app, assists the public in identifying suspicious web addresses, emails, usernames, bank accounts, mobile phone numbers, and IP addresses.
Investigators have noted that fraudulent websites typically maintain domain registrations only for short durations. The police have urged investors to understand the characteristics of their investment products and platforms thoroughly, along with their own risk tolerance.
Recent checks on Hounax’s digital presence revealed that the company’s websites, Facebook page, and accounts on X (formerly Twitter) were no longer accessible. One of the pages was flagged as a “deceptive site”, warning users of potential risks involved in providing personal information such as passwords, phone numbers, or credit cards.
The Securities and Futures Commission (SFC) flagged Hounax as a dubious virtual asset trading platform on 1st November, after discovering fraudulent claims about its associations with a financial institution and a venture capital firm. Despite the warnings, the SFC was unable to shut down the unlicensed platform, leading to criticism from lawmakers about its handling of the case and calls for the government to plug legal loopholes.
Hong Kong’s Chief Executive, John Lee, has indicated that authorities might empower regulators further to combat cryptocurrency scams. The city leader committed to reviewing the relevant legislation following the incident.
Police investigations have revealed that the alleged scammers targeted potential victims through social media and WhatsApp, inviting them to join group chats where they shared “hot tips”. The platform, claiming to be managed by a Singaporean company, began operations earlier this year, seemingly focusing on Hong Kong investors.
However, the authorities have found no connection between this case and the massive JPEX cryptocurrency exchange scandal, which affected 2,623 people and involved more than HK$1.6 billion in losses. To date, 66 people have been arrested in connection with the JPEX scandal, with all suspects released on bail pending further investigation.