Mastermind escapes as AAX cryptocurrency exchange abruptly halts operations last year, 2 arrested

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19th September 2023 – (Hong Kong) Police conducted massive raids and arrests at multiple cryto exchange stores linked to JPEX around the city yesterday. Meanwhile, a similar case occurred last year where a Hong Kong-based cryptocurrency exchange platform called “AAX” abruptly ceased operations at the end of last year, leaving over 2 million users worldwide unable to access or transfer their assets. Law enforcement agencies later discovered that the mastermind behind the platform had fled with approximately HK$233 million worth of assets and subsequently arrested two individuals.

AAX, a virtual currency trading platform, was established in November 2019 and operated by a company based in the Republic of Seychelles, with a separate management entity in Hong Kong. It offered services such as cryptocurrency trading, futures, and regular inventory products, attracting a user base of over 2 million globally. However, in November of the previous year, the platform repeatedly claimed the need for system maintenance, suspending customer transactions and asset withdrawals. Eventually, the company stated that it was considering issuing debt to raise funds for sustaining the platform’s operations.

Law enforcement agencies received reports from citizens who were unable to access their virtual assets during the announced system maintenance period. Investigations, including searches at the company’s offices and interviews with informants and former employees, revealed that the mastermind had left Hong Kong with the virtual currency wallet and private keys associated with the trading platform. It is believed that the mastermind and the suspects used the system maintenance excuse to avoid customers withdrawing their virtual assets, and disseminating false information externally.

The department promptly arrested two men involved in disseminating false information. They held positions as an employee and consultant respectively, and both attended meetings where false information was circulated. Bank accounts related to the company and the suspects, totalling around HK$2 million, as well as two local properties valued at approximately HK$55 million, were frozen. The investigation also uncovered that the virtual currency wallet assets taken by the mastermind were worth around US$30 million (equivalent to approximately HK$233 million).

In the same month, the department received a total of 337 reports, with 190 of them from local residents and the rest from individuals in mainland China, Taiwan, Singapore, Italy, France, and other locations. The reported losses ranged from a few hundred Hong Kong dollars to HK$12.6 million, amounting to a total of approximately HK$98 million. The highest reported loss was from a Hong Kong resident.