In a bold move, JPEX, the cryptocurrency platform under scrutiny by Hong Kong’s authorities, has put forth a dividend plan to lure investors. This strategy emerges in the backdrop of the company’s suspended trading operations and recent police raid, raising eyebrows amidst Hong Kong’s attempts to curb what might evolve into the largest financial fraud in the city’s history.
Branded the “DAO Stakeholders Dividend Plan,” JPEX has spotlighted an investment opportunity that promises new users a lucrative dividend-paying asset. The terms indicate a potential doubling of the original investment within a span of two years. Under this plan, JPEX pledges to distribute 49% of the stakeholder dividends, amassing a total value of US$400 million.
By the week’s close, current investors, who presently have their assets frozen on the platform, will have an opportunity to vote on the plan. If approved, it would grant them the ability to convert their funds into DAO Stakeholder dividends, ensuring a one-to-one repurchase ratio after two years.
The term DAO, or Decentralised Autonomous Organisation, pertains to a system where decisions are made collectively by its members. Notably, JPEX’s operations are helmed by an anonymous DAO, as per details available on the company’s official site.
However, the cryptocurrency platform’s recent proposal seems to directly challenge the Hong Kong regulatory crackdown, which has culminated in the arrest of at least eleven individuals. These arrests were tied to charges associated with disseminating misleading information related to the exchange. Such confrontations highlight the challenges in overseeing financial activities in the vast realm of the internet, particularly when services transcend national borders.
Jason Ho from EY Financial Services expressed skepticism about JPEX’s intentions, mentioning the plan’s nature as potentially converting users into equity owners rather than reimbursing them their assets. The inability of users to retrieve their funds from JPEX underscores the platform’s inadequate protective measures for its clientele. Recent reports note over 2,000 investor grievances concerning inaccessible assets valued above HK$1.3 billion on JPEX.
Adding to the skepticism, Jack Poon from Hong Kong Polytechnic University questioned the economic viability of such a dividend plan given JPEX’s unstable standing.
In response to the derivative plan, JPEX claims that the Securities and Futures Commission’s (SFC) advisory against the platform led to malicious third-party activities, causing funds to be locked. Justin d’Anethan, from Keyrock, countered this by stressing that crypto exchanges should command full operational control over user transactions.
In a subsequent announcement, JPEX accused the SFC of implementing vague regulations and levying baseless charges. They also revealed that the SFC urged telecom operators to block the platform. Despite these allegations, JPEX encouraged investors to employ a virtual private network for accessing their platform.
Contradicting JPEX’s claims, the SFC emphasized that it initiated inquiries into the platform’s activities as early as March 2022. By disclosing email communications, the SFC claims JPEX violated confidentiality clauses stipulated in multiple ordinances.
Amidst these controversies, Neha Parmar of FTI Consulting highlighted the inherent ambiguities in Hong Kong’s regulatory landscape, particularly during the transitional phase. She advised investors to tread cautiously, emphasizing the risks linked to investing in unlicensed crypto exchanges within the city.