18th September 2023 – (Hong Kong) Joseph Lam Chok, a lawyer-turned-insurance manager and social media influencer, was recently arrested over his involvement in promoting the unlicensed cryptocurrency trading platform JPEX in Hong Kong.
Prior to his arrest, Lam had been vocally proclaiming his innocence in public statements and on social media. Just 10 hours before his arrest, he had posted on social media showing himself playing football with friends. His girlfriend Hiromi Wada had also posted beauty and skincare tips 12 hours before. Their posts indicate they had no idea the arrest was coming. Since being arrested, neither Lam nor Wada have posted any updates online. Local media contacted Lam, his mother, and Wada but received no response. Wada subsequently expressed that she was not too concerned and shared that Lam’s mother was unable to return to Hong Kong immediately, leaving her to face the situation alone. She stated that she would be ready to be on standby at any time and take immediate action if needed. She does not consider herself to be the “best girlfriend” and believes that even if it were just a close friend in trouble, she would always be there to lend a helping hand.
Lam had previously clarified the situation regarding himself and other celebrities who were involved in promoting JPEX. These included Hong Kong actor Julian Cheung, actress Jacqueline Ch’ng, social media influencer Derek Cheung, Taiwanese singer Nine Chen and metaphysician Clement Chan Ting Bong. Lam explained they had all promoted JPEX in a capacity similar to spokespersons or agents, but emphasised they were not platform members.
Lam acknowledged facing significant losses, both financially and reputationally, saying his abilities were now being questioned. Jacqueline Ch’ng, also implicated, took down her JPEX promotional video. She claimed to have never had direct contact with the company, saying the video was done via a collaborating company. As she currently works in mainland China, Ch’ng said she lacks details on the matter and took the video down temporarily.
At a recent event, Ch’ng had claimed to be a victim with six-figure losses from JPEX. Now distant from the controversy, she won’t pursue legal action. When mocked as an “investment genius” online, she denied it, saying losses don’t count until the end. Julian Cheung’s manager responded that after shooting ads in 2021, they notified JPEX not to use Cheung’s image in Hong Kong before proper licensing. Cheung reportedly had no investments or losses.
In November 2022, JPEX announced that it had become the official partner of esports team HKA, founded by influencer Derek Cheung who was also a JPEX brand ambassador. JPEX said the partnership would help both companies become number one in their fields.
Other JPEX spokespersons included metaphysician Clement Chan and Taiwanese singer Nine Chen. Two days after the JPEX troubles erupted, Chen posted that she was unaware of the situation until recently. Her company was still investigating but would fully cooperate with authorities if required.
Hong Kong’s Securities and Futures Commission issued a stern warning about JPEX earlier in September for suspicious activities and lack of licensing. JPEX falsely claimed to be a licensed, recognised trading venue. This included alleging partnerships and investments from Hong Kong-listed companies that the SFC said were untrue.
The SFC urged extreme caution regarding opportunities that seem too good to be true. It highlighted the risks of unregulated platforms, including potential loss of funds. The regulator also requested all parties immediately stop promoting JPEX.
Beyond licensing issues, the SFC outlined suspicious aspects of JPEX’s operations. These included very high promised returns, withdrawal issues reported by clients, and JPEX issuing its own token JPC with limited functionality beyond trading on its platform.
Most concerning was JPEX suddenly increasing withdrawal fees from 0.1% to 99.9% the same evening they were singled out by the SFC. JPEX claimed this “transitional measure” was for integrating elsewhere, though details were vague. The SFC emphasised its readiness to penalise any regulatory violations, including potential HK$10 million fines and 10 years imprisonment. The matter was also referred to local law enforcement for investigation.
Before this warning, JPEX massively benefited from promotion by influential social media crypto personalities and over-the-counter crypto dealers in Hong Kong. Certain dealers strongly endorsed JPEX to clients as having special discounted rates.
After the SFC notice, most of these influential promoters abandoned JPEX or stayed silent. Many over-the-counter shops paused operations, some citing JPEX withdrawal issues. JPEX also deserted its major conference booth in Singapore. Some JPEX trading was halted amidst the ongoing police investigation. JPEX stated market makers had frozen funds following probes by Hong Kong authorities. It claims existing trading orders will continue until maturity.
Police report 83 complaints against JPEX totalling HK$34 million in losses. JPEX is headquartered in Dubai according to its website. Meanwhile, during a press conference held today (18th), Legislative Councillor Johnny Ng revealed that he has received assistance requests from 30 victims, involving a total amount exceeding HK$100 million, in connection with the suspected fraud case surrounding the crypto asset trading platform JPEX.
The JPEX saga offers cautionary lessons regarding celebrity cryptocurrency endorsements. In the U.S., Kim Kardashian was fined US$1.26 million by the Securities and Exchange Commission for failing to disclose her US$250,000 promotion fee from crypto firm EthereumMax. The SEC said crypto assets can be securities requiring disclosure of paid promotions. While Kardashian settled without admission, the SEC said the case reminds celebrities that disclosing payments for endorsing investments is a legal requirement. SEC Chair Gary Gensler warned investors not to make decisions based solely on celebrity crypto recommendations.
So far in the JPEX case, Julian Cheung’s team emphasised they prohibited using his image in Hong Kong without proper licensing. Jacqueline Ch’ng claimed ignorance given her work focus overseas. Nine Chen promised to cooperate with authorities if required.
For endorsers like Joseph Lam who actively participated, consequences seem likely unless they can prove naive ignorance. But for celebrities disengaged from operational details, the lines of liability may be blurred. Prosecution could depend on evidence showing willful neglect or awareness of suspicious activities.
Hiromi WadaActress
Metaphysician Clement Chan Ting Bong