Hong Kong: The alleged billion-dollar scam run by the Hounax virtual asset trading platform has recently drawn harsh criticism from the Hong Kong government. According to reports, 131 people have fallen prey to this intricate ploy, losing roughly HK$120 million.
Earlier this month, the Securities and Futures Commission raised red flags, designating Hounax as a questionable virtual asset trading platform. Authorities are stepping up their attempts to apprehend individuals guilty of this financial fraud.
Hounax first appeared on the scene in early 2023, posing as a Singaporean corporation. Its operations have raised concerns because it appears to target Hong Kong investors exclusively. As the investigation progresses, questions about the regulatory safeguards in place and the difficulties that law enforcement faces in tracking down such complex financial scams arise. Let’s look into the complexities of this case and the efforts being made to bring the offenders to justice.
Some Hong Kong residents involved in an alleged HK$120 million (US$15.4 million) cryptocurrency fraud said the securities watchdog’s classification of the platform as suspicious earlier this month came too late because their money had already been locked in by an “investment deal.”
One of the more than 130 alleged victims stated that he had relaxed his guard because the cryptocurrency network Hounax appeared to be recognized by international authorities. The individual, surnamed Ng, 50, claimed the fraud was well-executed and had been planned for months.
On Monday, lawmakers also urged the government to remove a legal gap that hampered the Securities and Futures Commission’s authority to respond to unlicensed-but-not-banned platforms, allowing them to trade in a “unregulated vacuum.”
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On Saturday, police said they had received 88 reports from 131 persons claiming to have lost about HK$120 million. Among the victims, a 69-year-old retired woman is said to have suffered the largest loss of HK$12 million.
On November 1, the Securities and Futures Commission added Hounax to its list of questionable virtual asset trading platforms.
The watchdog stated on Monday that it had received 15 complaints about the platform thus far. It was also said that the cases had been filed with the police.
Ng, a maintenance worker, claimed he was duped out of HK$150,000 and had filed his case to police as early as November 14 but had not received a response. He found out about other occurrences involving the site approximately a week later after joining a related Facebook group.
He said he first became involved with the scammers posing as “financial experts” on Facebook in April, and then joined their WhatsApp discussion group, which offered stock trading advice and helped the fraudsters to build confidence.
Scam victims and lawmakers have chastised the Securities and Futures Commission for taking too long to respond to the newest bitcoin scam. Yik Yeung-man’s photograph
By August, the equities were underperforming, and the WhatsApp group’s “experts” advised trading cryptocurrencies on the Hounax platform.
Looking back, Ng realized that the majority of the group of 50-60 individuals were in on the deception, with only a handful of members being duped.
To establish the appearance of authenticity, the accomplices would all claim they could retrieve funds from the platform and even demonstrate their account transactions.
“They were using methods like that, to make sure you couldn’t tell who was who, so you couldn’t verify information,” he told me.
Ng claimed that the SFC’s decision on November 1 was too late, as many clients’ funds had already been frozen.
The platform offered a Mid-Autumn Festival buy-one-get-one-free promotion on bitcoin coins in September, with the caveat that users could not withdraw them until November 12.
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In light of a HK$1.6 billion financial crisis involving another cryptocurrency platform, JPEX, Ng originally approached Hounax with caution, putting only HK$20,000.
After successfully retrieving his money from the platform in September, he relaxed his security.
He felt even better when he saw that Hounax was listed in a Canadian business registry and that a search of Hong Kong police’s CyberDefender website, which monitors internet scams, had no results.
“I only invested because of these checks.” “Who knew it was still a scam after all those checks?” he wondered.
Another victim, an accountant named Wong, told the Post that the official warning came too late, and she lost roughly HK$100,000 in the scam.
Wong, who is in her forties, claims she was enticed by a scammer-run YouTube channel giving financial advice and joined a WhatsApp chat group in June after clicking on a link placed on the video-sharing platform.
The scammers then distributed quizzes on the group and earned the accountant’s trust by awarding her HK$1,000 in prize money the first time. After two additional wins, she was persuaded to open a Hounax account in order to collect the money.
Wong said she relaxed her guard after learning the organization was registered as a “money services business” in the United States and Canada, and that she had made two successful withdrawals by mid-September.
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However, she was skeptical about other aspects of the company’s operational strategy, such as a significant underestimate of handling fees and scammers offering her large sums of money in August and September.
She refused to borrow the money and left her account dormant, she added, only reported the situation to authorities on November 13 after the platform refused to allow her to withdraw any money.
Wong stated that she later realized the majority of the people in the WhatsApp group were involved in the fraud after their profiles suddenly vanished, along with the company’s social media pages, on November 19 when it became evident that the money could not be withdrawn.
“The warning to the public was too late in this whole incident,” she went on to say. “These scams are nothing new, but the planning and execution were done so meticulously.”
The current scam’s preparation and execution have been hailed as “meticulous” by victims. Photographer: Shutterstock
Meanwhile, MPs Doreen Kong Yuk-foon and Johnny Ng Kit-chong criticized the Securities and Futures Commission for failing to warn the public.
“There are hundreds of firms listed as ‘suspicious’ by the SFC,” he stated. “They can’t say, ‘We already informed you of that.'”
“It’s the equivalent of saying ‘best of luck’ to the general public.” Why couldn’t they do more if they thought the platform was suspicious? Their activities are now very passive.”
The member also pointed out flaws in the existing regulatory framework that prohibited the watchdog from responding proactively to unlicensed platforms, which were not illegal but resided in a legal gray area.
“In a developed society such as Hong Kong, these things should not be happening,” she went on to say. “The SFC cannot hide behind such an excuse.”
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Ng, who is also the convenor of an anti-deception association, believes the watchdog should have issued a warning far sooner.
Police stated on Saturday that fraudsters had promised speedy returns on victims’ investments in order to gain trust, but the figures were worthless and made up by the scammers, who had already transferred the deposited money.
When victims tried to withdraw their money later, the force claimed that the platform’s “investment managers” would reject their requests with various excuses or charge them a “verification” fee of up to 80% of their initial funds, claiming it was a requirement of an international anti-money-laundering organization.
According to authorities, the website, which claimed to be owned by a Singaporean corporation, began operating early this year and appeared to target Hong Kong investors.