Hong Kong to review laws, regulators’ powers after crypto scandals: John Lee

Hong Kong authorities can further empower regulators to tackle cryptocurrency scams, the city's leader said, after a watchdog failed to shut down the unlicensed platform at the center of an alleged $148 million fraud Hong Kong dollars (US$19 million).

Chief Executive John Lee Ka-chiu said on Tuesday his administration would review relevant legislation, a day after lawmakers criticized the Securities and Futures Commission (SFC) for its handling of the case and called on the government to shut down legal loopholes.

"If any of our laws in this area need to be strengthened, or if the transparency of the information we publish has room for improvement, we will actively consider this," he said ahead of his weekly Executive Council meeting. "I will also ask relevant offices and departments to make progress in these areas."

Hong Kongers Who Lost HK$148 Million in Crypto Scam Say Public Warning Came Too Late

Lee said the government would look to give more powers to regulators if necessary, adding that the SFC would consider what current measures it could take, such as using anti-money laundering laws.

Police said on Monday that 145 residents claimed to have lost around HK$148 million after they were asked to invest in cryptocurrency platform Hounax, following an investigation that began on Saturday.

Lawmakers criticized loopholes that prevented the watchdog from taking enforcement action against unlicensed platforms and accused the regulator of taking too long to warn the public.

The SFC dismissed suggestions that the latest incident reflected “significant deficiencies” in its monitoring work and said it needed time to investigate the cases.

"The platform is not regulated or licensed by the SFC," a spokesperson for the regulator said. “As such, the SFC does not have the power to cease operations.”

Lee said the public should only trade on authorized platforms and that authorities must provide information quickly and transparently. Investor education also needs to be strengthened, she added.

"I want to emphasize that we must use all available methods to protect the interests of investors, as well as combat any platform or website that is unlicensed, illegal or has fraudulent elements," he said.

Hounax platform allegedly scammed 131 Hong Kongers out of nearly HK$120 million

The latest case follows the scandal centered on the JPEX cryptocurrency exchange, which involved more than 2,500 alleged victims and more than HK$1.5 billion in losses.

The scandal, which broke in September, is the largest case of financial fraud in the city's history and exposes flaws in the regulatory regime amid an effort to transform Hong Kong into a virtual asset hub.

Police said they found some link between the alleged scam involving Hounax and the JPEX case.

Hounax, which began trading this year and appeared to target local investors, said it was run by a Singapore company.