Bitcoin
My Tour of Hong Kong’s Abandoned Crypto Shops Revealed a City Ravaged by an Erratic Industry – DL News
- Visiting Hong Kong’s closed OTC outlets showed the city’s love-hate relationship with crypto.
- The hype for Bitcoin and Ether ETFs contrasts with the rise in fraud.
- ‘We’re here so soon,’ say crypto boosters.
In Hong Kong, the police tape that cordoned off store windows has long since disappeared. Most of the stores are empty, the windows are full of event posters and real estate agent contacts.
They are all that remains of JPEX, a cryptocurrency exchange that vaporized in late 2023 and left more than 2,600 depositors with around $206 million in funds.
Over the past few weeks, I took my camera and went on a walk around Hong Kong to see what had happened to these places. The last time I stuck my head through the window of one of them, there were still a few half-empty cups of tea on the table, the whole boba freezing.
Now these empty spaces are a striking symbol of the random fortunes of an industry that Hong Kongers seem to love and hate at the same time.
A Tale of Two Crypto Cities
Participants in Hong Kong’s crypto scene say their mission is to “onboard the next billion people to web3,” as a popular slogan goes.
Industry boosters are working to sell the city as a thriving hub for blockchain innovation, and to their credit, they wasted no time in approving Bitcoin and Ether ETFs in April.
Hong Kong was the first Asian market to follow the lead of US regulators, who opened the door to popular investment products in January.
At the same time, founders, entrepreneurs, and developers regularly flock to the city for a perpetual stream of conferences, conferences, and symposiums. Later this week there is the Bitcoin Asia event with panel discussions on everything from institutional infrastructure to layer 2 venture capital.
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“We’re so early,” crypto enthusiasts say when they compare themselves to the early adopters of the Internet.
Rogue exchange
However, after a few drinks, those same people will admit that they can’t understand how the company in the conference booth next to theirs is producing the revenue it promises to customers.
And the empty storefronts linked to JPEX are a more glaring reminder of the other aspects of the crypto landscape that “professionals” would rather not talk about.
Unable to withdraw
JPEX dominated headlines in Hong Kong for weeks last year. The subject of an ongoing criminal investigation, users were unable to withdraw funds from the exchange.
The Securities and Futures Commission also warned was misrepresenting itself as a virtual asset licensing platform. On April 18, law enforcement officials said they had frozen $29 million linked to the exchange.
The JPEX team abandoned a booth at Token2049 in Singapore in September 2023 and, with the exception of a few short blogs in the weeks that followed, neither the company nor its mysterious managers have been heard from since.
Some of the OTC outlets already have new tenants. One of them, a Coiner store in a mall on Nathan Road, became a furniture store, although it retained the orange Bitcoin decor.
Around the corner, another OTC outlet is now a pharmacy. There are still some pink and black striped panels that show its former life as CryptoPard.
As Hong Kong tries to rebrand itself as a crypto hubis struggling to solve the problem rampant scams and schemes that use cryptography to operate.
In 2023, cryptocurrency-related fraud accounted for more than half of the $764 million in online and offline investment losses, according to authorities.
This is an inconvenient development for entrepreneurs who are touting cryptocurrencies as a new asset class worthy of investment by the super-rich families and institutions that have long dominated Hong Kong.
However, investors have lost millions on JPEX and other rogue exchanges such as Hounax and BitForex.
With law enforcement investigators struggling to even identify the owners of these platforms, recourse for people who, in some cases, have lost their savings, is virtually impossible.
Even offline, crypto is becoming a difficult business.
Hong Kong police are currently searching for four men who kidnapped a 50-year-old crypto retail investor over a financial dispute. She and her husband were attacked, the latter with a stun gun, on the night of May 7, police said.
Last month, a teenager was lured into a hotel room in Kowloon under the pretense of meeting some fellow crypto traders. The people he met — all ages 16 to 19 — beat him with baseball bats and demanded $23,000 of his business profits, according to South China Morning Post.
Day after day, Hong Kongers are inundated with “wrong number” messages and phishing emails from so-called pig butchers and investment fraud.
‘Philosophical advice’
Meanwhile, the influencers who ran the JPEX-linked OTC stores are still promoting its upcoming launch online.
Former JPEX prosecutor Joseph Lam now offers “philosophical counseling” services on everything from legal advice and romantic relationships to marketing and letter writing services. He said in an Instagram post that more than 200 clients have accepted his services since the beginning of the year.
OTC Tung Club store founder and JPEX promoter Henry Choi still promotes online crypto courses – annual subscription costs 1,100USDT.
Neither Lam nor Choi responded to separate requests for comment made by DL News.
Last month, 70 people were arrested in connection with the JPEX investigation.
No one was charged.
Callan Quinn It is DL News’ correspondent in Hong Kong. Get in touch at callan@dlnews.com.