Hong Kong SFC Faces Criticism for Late Alert on $15.4 Million Hounax Scam

Published: November 27, 2023 at 6:38 am Updated: November 27, 2023 at 6:38 am

Edited and fact-checked:
November 27, 2023 at 6:38 am

In Brief

Hong Kong residents caught up in the Hounax scam asserted that the watchdog’s listing was too late, SFC calls on the Hong Kong government to address legal loopholes

Hong Kong SFC Faces Criticism for Late Alert on $15.4 Million Hounax Scam

Hong Kong residents caught up in an alleged $15.4 million crypto scam involving the Hounax platform assert that the HK SFC’s listing of Hounax as suspicious this month was too late, as their funds had already been ensnared in an investment deal.

Over the weekend, Hong Kong police revealed 88 reports from 131 people, collectively claiming losses of nearly $15.4 million in the purported Hounax scam. As of Monday, the watchdog had received a total of 15 complaints related to the platform.

The Securities and Futures Commission (SFC) included Hounax to its alert list of suspicious virtual asset trading platforms on November 1. However, victims argue that the SFC’s move came too late, considering that a substantial amount of customers’ funds had already been tied up by that point.

Those affected claim to have lowered their guards because the crypto platform seemed to have garnered recognition from international authorities.

Lawmakers on Monday called on the government to address a legal loophole that restricted the Securities and Futures Commission’s ability to promptly respond to unlicensed platforms that were not officially banned, allowing them to continue trading within an “unregulated vacuum.”

The Securities and Futures Commission listed Hounax as a suspicious virtual asset trading platform earlier in the month, discovering that it had provided false information about its ties with a financial institution and a venture capital firm.

Current Crypto Regulations in Hong Kong

Hong Kong’s regulatory authorities successfully navigated the cryptocurrency market downturn without suffering reputational harm last year.

Following the events involving FTX, Hong Kong’s government has been urged to open licensed cryptocurrency markets to retail investors to prevent them from using unlicensed or overseas exchanges, thereby reducing the risk of falling prey to scams.

Although Hong Kong’s Securities and Futures Commission has already instituted measures to protect retail investors, there remains a necessity for a comprehensive education and protection ecosystem. This collaborative effort involves various authorities, cryptocurrency industry stakeholders, banks, and the public.

Last week, the watchdog included another suspicious organization, the Hong Kong Digital Research Institute, in its alert list due to its attempts to target Hong Kong investors and false claims of possessing a license.

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About The Author

Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and engagement with scientific writing.

Alisa Davidson