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HK police initiate probe into Hounax over alleged investment scam case

HK police initiate probe into Hounax over alleged investment scam case

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Hong Kong police force (HKFP) has initiated an investigation into local virtual asset exchange platform Hounax after over 130 people claimed they were scammed out of HK$110m.

According to a press briefing by the police, Chan Wai Kei, superintendent of the HKFP’s commercial crime bureau said the police have received 88 reports from 131 alleged victims during November, who claimed they lost over HK$110m ranging from HK$12,000 to as much as HK$4m. The youngest was 19 and the oldest was 78.

Claimed to be run by a Singaporean company, Hounax started operating early this year and targeted Hong Kong investors, Chan said. A check by MARKETING-INTERACTIVE saw the website has been removed and is listed as a deceptive site. 

Speaking of the process of the fraud, Chan said the scammer pretended to be an investment expert and lured citizens into investing in virtual currencies through a virtual asset trading platform, promising significant returns on their investments. “However, when the investors tried to withdraw the money on the platform, they were unable to do so.”

Or Wing Yan, chief inspector of the bureau, said the scammers reached out to citizens through social media platforms such as Facebook and WhatsApp, inviting them to join group chats that shared tips and analysis. “When someone showed an interest to invest, scammers will send a hyperlink, requesting them to download an app and transfer money to a third-party bank account to top up their investment accounts,” Or said.

“Victims would see quick returns in their investment accounts in the beginning. However, these were just meaningless numbers made up by the scammers to gain victims’ trust. In fact, when the victims transferred the money to the scammer's designated account, the money was already transferred away immediately,” 

When victims tried to withdraw the money, the platform’s staff would reject their requests with different excuses or even charge them a verification fee of 20% to 80% of their initial funds. Chan urged the public to remain vigilant and avoid blindly following the recommendations of so-called investment experts.

He added that the authorities would make arrests in the near future, stating that the police had requested telecoms companies and social media platforms to block the scammer's website and its accounts.

On the other hand, the Securities and Futures Commission (SFC) listed Hounax as a suspicious virtual asset trading platform on its alert list early this month after it falsely claimed to be a cryptocurrency trading platform in collaboration with a financial institution and a venture capital firm.

“It appears to target Hong Kong investors with pre-populated +852 field in its user log-in page and “Hounax Hong Kong” social media channels on Facebook, X (formerly Twitter) and YouTube,” the statement reads.

Commenting on the incident, Francis Fong Po Kiu, honorary president of the Hong Kong Information Technology Federation, told MARKETING-INTERACTIVE that trading platforms offering promises of high returns is abnormal and it is hard for victims to get back all their money in this case.

Fong said citizens need to be vigilant and alert when it comes to investing on virtual asset trading platform, and it’s best for them to go to authorised platforms endorsed by the SFC. 

Meanwhile, Joshua Chu, group chief risk officer, Coinllectibles, said the ease of deployment of fake platforms (and even fake banking sites in concert with DNS hacks) highlights emerging threat.

"It took years for law enforcement to tackle phone frauds (now we get alerts for suspicious calls). How long will the catch up be for law enforcement and industry to do the same for emerging threats?" he added.

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In fact, the police received over 4,300 reports regarding investment scams in the first nine months of this year, a 105% increase over the same period last year, with HK$2.8bn lost, according to Chan. Back in September, the authorities initiated probe into a suspected fraud related to the cryptocurrency exchange JPEX, which was revealed to be an unlicensed trading platform.

According to local reports such as HK01, the police arrested at least 66 people related to the incident, including influencer Joseph Lam. All of them have been released on bail. As of 26 November, the police had received reports from 24 more victims, bringing the total number of reports to 2,623, involving a total amount of approximately HK$16bn.

Related articles:

Influencers face backlash for JPEX promotion: Were they to blame? 
HK influencer Joseph Lam reportedly arrested amid probe into trading platform JPEX

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