**Anonymous creators abscond with $19 million from unlicensed crypto exchange in Hong Kong, leaving users in lurch**
The city of Hong Kong is reeling from its second major crypto scandal in barely two months after the creators of an unlicensed crypto exchange allegedly absconded with $19 million, leaving users in the lurch. Some 145 people were affected by the hack of the Hounax exchange, according to police. This latest incident has prompted criticism of the city’s crypto regulations and oversight.
**Lax Regulatory Oversight Questioned**
The Securities and Future Commission, Hong Kong’s version of the SEC, is facing criticism that it’s been too lax in its approach toward crypto. Hounax lured in retail investors via social media, claiming it was cofounded by the original Coinbase technical team and had a Canadian Money Services Business license. The exchange also said it was courting investments from Sequoia Capital and IDG Capital. However, in early November, the SFC designated it a suspicious platform and warned investors to steer clear.
**Investors Left Deceived**
After investors made deposits, the Hounax app allegedly displayed growing balances but, according to authorities who spoke to local media, those funds had already been drained. The incident comes after more than $120 million disappeared from the unlicensed JPEX crypto exchange in September. Since then, 66 people have been arrested in connection with the case, including influencers and JPEX employees.
**Criticism of Regulatory Response**
Some Hong Kong lawmakers have criticized the SFC for not doing more to prevent such exploits. Lawmaker Doreen Kong Yuk-foon of the Election Committee said Hong Kong’s crypto regulator could have stepped in earlier and must shut down unregulated exchanges so as to not leave “every investor to themselves.” Hong Kong Chief Executive John Lee Ka-chiu stated that the “government will actively cooperate” if the SFC requires more power to crack down on unregulated exchanges like Hounax.
**Hong Kong’s Relationship with Crypto**
Although crypto trading is banned in mainland China, Hong Kong has embraced digital assets, introducing a licensing scheme in June and allowing for some types of crypto trading. Despite this, the recent scandals involving unlicensed exchanges have raised questions about the effectiveness of the regulatory framework in the city.
The Hounax hack has also prompted concerns about the security of crypto exchanges and the need for stronger regulatory oversight in the rapidly evolving digital assets landscape. These events reflect the challenges faced by regulators in keeping up with the fast-paced world of cryptocurrency.
I have been featured in numerous publications, both online and offline, and am a regular speaker at industry events. I am also the founder of Crypto University, an online educational platform that helps people learn about cryptocurrencies and blockchain technology. In addition to my writing and teaching career, I am also an active investor in the cryptocurrency space. I have made investments in some of the leading projects in the space, and my portfolio has outperformed the market by a wide margin