- Hounax defrauded 145 users in Hong Kong, leading to a loss of $18.9 million.
- The platform falsely claimed legitimacy and used social media for recruitment, joining a list of nine suspicious crypto platforms flagged by the SFC.
- The scam is part of a trend of crypto fraud in Hong Kong, prompting the launch of stricter regulations for the sector.
The Hong Kong cryptocurrency community faces a severe setback as the unlicensed crypto exchange Hounax defrauded 145 users, resulting in losses totaling 148 million Hong Kong dollars (equivalent to $18.9 million).
The revelation came to light following a press conference by the local police on November 25th, which brought the nefarious activities of Hounax to the forefront.
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The Securities and Futures Commission (SFC) of Hong Kong, as of November 27th, had registered 18 complaints regarding the crypto exchange, with individual losses ranging from 12,000 HKD ($1,539) to as high as 10 million HKD ($1.2 million).
Hounax, under the impression of being a licensed platform, claimed cooperation with legitimate financial institutions. However, on November 1st, the SFC identified it as a suspicious platform, warning users of its risks.
Despite this, Hounax managed to attract local customers with fraudulent claims of being founded by Coinbase's original technical team, possessing a Canadian license, and having potential investments from major firms like Sequoia Capital and IDG Capital.
Ke Yongn, the chief inspector of the Commercial Crime Investigation Section of the Hong Kong Police, pointed out that the platform extensively used social media for its operations. At the time of writing, Hounax's official Facebook page has been deactivated.
In a broader context, Hounax is now part of a list of nine suspicious crypto investment platforms identified by the SFC, which includes JPEX, Hong Kong Digital Research Institute, BitCuped, FUBT, futubit/futu-pro, EFSPD, OSL trading, and arrano.network.
This incident is reminiscent of the earlier JPEX exchange scandal in Hong Kong, which involved over 2,000 complaints and a reported loss of around $180 million. In that case, 66 individuals were arrested.
The Hounax scam underscores the growing concerns around cryptocurrency exchanges in Hong Kong. In response, local regulators are tightening crypto regulations to prevent further industry mishaps. Despite these challenges, the authorities have affirmed that the one-year grace period for cryptocurrency exchanges in the country will continue as planned.