Hong Kong Court Rules in Favor of Investors in JPEX Fraud Case

Hong Kong Court Rules in Favor of Investors in JPEX Fraud Case

A significant ruling in the ongoing JPEX fraud case emerged from a Hong Kong court which sided with two investors in a civil lawsuit against the now-defunct cryptocurrency exchange JPEX and a related entity. This decision marks a pivotal moment in a major financial fraud investigation that has drawn considerable attention.

Court Ruling and Compensation Ordered

District Court Judge Grace Chow Chiu-man issued a declaratory judgment for the plaintiffs Herbert Lee Sung-him and Chan Wing-yan eliminating the need for a trial. The court mandated the recovery of HK$1.85 million (approximately US$238,000) which is equivalent to 247,000 USDT to be returned to the plaintiffs.

This legal action stemmed from a lawsuit filed by the plaintiffs in June 2023 against the Dubai-based JPEX and Web3 Technical Support among others. The lawsuit alleges that Chan transferred USDT to various JPEX wallets in July and August 2023 with one of the transfers linked to a third party named Lam. Following these transactions the cryptocurrency inexplicably disappeared from their wallets leaving the investors unable to recover their funds.

Lack of Representation from JPEX and Web3 Technical Support

Neither JPEX nor any representatives from Web3 Technical Support attended the court hearing. Judge Chow noted the necessity of the injunction sought against Web3 Technical Support stating that it was essential to assist in the recovery of the USDT deposits which were claimed to be held in trust by the entity for the plaintiffs. Additionally Web3 Technical Support is facing approximately $15,400 in court costs.

Joshua Chu Kiu-wah the plaintiffs’ legal representative informed the South China Morning Post that they plan to pursue enforcement action to retrieve the frozen funds held by the police.

Background of the JPEX Fraud Case

The JPEX fraud case first came to light in September 2023 when the Hong Kong Securities and Futures Commission issued a warning indicating that JPEX was operating without a license. Following this alert Hong Kong police received over 2,200 complaints against the exchange which resulted in multiple arrests including those of influencers and celebrities who had promoted JPEX.

Allegations against JPEX included imposing exorbitant withdrawal fees to retain customers and attempts to transition into a decentralized autonomous organization (DAO) which involved converting user funds into DAO shareholder dividends.

Impact on Investors and Regulatory Landscape

The JPEX fraud has left an estimated 2,600 victims facing collective losses of approximately $206 million. The initial legal victory for the investors could have significant implications for future court actions as well as influencing the regulatory approach to cryptocurrency exchanges in Hong Kong.

As the case unfolds further legal proceedings are anticipated as investors seek justice and recovery of their funds while regulatory bodies reassess their oversight of the rapidly evolving cryptocurrency landscape.