Another $18.9M Hong Kong exchange scandal, HTX ‘sorry’ airdrop: Asia Express
Our weekly roundup of news from East Asia curates the industry’s most important developments.
Yet another crypto scandal in Hong Kong
Scammers posing as investment experts allegedly enticed 145 victims to tip $18.9 million into the unlicensed Hong Kong crypto exchange Hounax.
According to reports earlier this week, the police said investors were allegedly promised up to 40% return per annum with “no risk” in its advertisements. After users deposited their funds, they were unable to withdraw them. On November 1, the Securities & Futures Exchange (SFC) of Hong Kong listed Hounax on its billboard of suspicious crypto exchanges but clarified that because Hounax was unlicensed at the time of incident, it was not subjected to the regulatory’s enforcement actions.
This was the second scandal involving a crypto exchange in Hong Kong in recent months. In September, another unlicensed exchange JPEX collapsed after allegations of a Ponzi scheme unsurfaced, leading to 66 arrests and an estimated $205 million in investors’ losses.
Despite the scandals, Hong Kong regulators appear to remain steadfast in their commitment to transforming the city into a major Web3 hub. On November 27, SFC CEO Julia Leung, explained that “even if the grace period ends tomorrow, fraud will still occur, so there is no intention to modify the grace period and other measures for the time being.”
Under current regulations, a grace period for crypto exchanges to operate without registration will end in June 2024. On November 30, the SFC stated that it seeks to legitimize initial coin offerings in the city to create more revenue for the national budget.
In other Hong Kong crypto news, the financial institutions, Interactive Brokers and Victory Securities, this week announced they had secured crypto licenses, with the former partnering with licensed crypto exchange OSL to immediately provide Bitcoin (BTC) and Ethereum (ETH) trading services to its Hong Kong clients.
And on November 29, Darryl Chan, deputy chief executive of the Hong Kong Monetary Authority, announced a multinational effort to create a cross-chain bridge for China’s digital yuan central bank digital currency (e-CNY CBDC). Dubbed “mBridge,” the protocol seeks to reduce transaction fees and improve speeds for cross-border uses of the e-CNY CBDC. The first pilot tests will begin in Mainland China and Hong Kong.
Read also
Foreign banks join e-CNY pilot testing
Standard Chartered, HSBC, Hang Seng Bank, and Taiwan-based Fubon Bank have begun testing of the digital yuan in cross-border transactions.
According to local news reports on November 28, the four foreign banks will also integrate e-CNY transfer services for their clients and enable them to deposit and withdraw e-CNY. Personal banking accounts will also support the official e-CNY app and self-custody wallet. Yuesheng Song, president and vice-chairman of Hang Seng China, commented:
“The central bank’s launch of the digital RMB, a legal currency in digital form, is an important step for China to explore the development of digital currency and promote the internationalization of the RMB. Hang Seng China follows the national financial development policy advocacy and actively supports the application and development of the central bank’s digital currency.”
In the first three quarters of 2023, the use of the digital yuan in transactions was up 35% year-on-year, reaching $1.39 trillion, China Daily reported. On November 29, the first-ever e-CNY student loans were issued in the province of Suzhou with $26,230 worth of loans being issued directly into the digital wallets of 13 recipients.
HTX back to normal
HTX exchange (formerly Huobi Global) has reopened deposits and withdrawals after a devastating hot wallet hack that drained the exchange of $30 million on November 22.
According to the November 26 announcement, the exchange has since resumed deposits and withdrawals on the Bitcoin, Ethereum, and Tron networks.
“Huobi HTX once again promises to fully compensate for the losses caused by this attack and 100% guarantee the safety of user funds. The amount of funds lost by Huobi HTX this time accounts for a very small amount of the total funds of the platform,” the exchange said.
The firm has also announced that a special airdrop will take place in December designed to reward its “loyal users.” Airdrop tokens will reportedly come from an “upcoming high-quality projects,” and the amount to be received will be determined by a users’ average net assets on the HTX exchange denominated in Tether (USDT).
Immediately after the incident, Justin Sun, founder of the Tron ecosystem and de-facto owner of the HTX exchange, commented “we will cover the loss and all assets are SAFE.” Despite assurances, however, this was the fourth exploit involving the HTX ecosystem within the past two months. Around the same time as the HTX exploit, the HTX Ecosystem Chain (HECO) bridge was hacked for $87 million.
On November 10, Poloniex, an exchange acquired by Sun in 2018, was hacked for $100 million due to allegedly compromised private keys. The exchange resumed withdrawals on November 30. On September 25, HTX was drained of $8 million in a security incident. The exchange has since clawed back $8 million in stolen funds and issued a 250 Ether bounty to the hacker.
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Avi Eisenberg was found guilty of fraud and market manipulation in April 2024 and could face up to 20 years in prison.
In what he said would be his last remarks as CFTC chair, Rostin Behnam said he intended to advocate for the commission to address regulatory challenges over digital assets.
A Tory bid to launch a new national inquiry into the grooming gangs scandal has been voted down by MPs amid criticism of “political game playing”.
MPs rejected the amendment to the Children’s Wellbeing Bill by 364 to 111, a majority of 253.
However, even if the Commons had supported the measure, it wouldn’t have actually forced the government to open the desired inquiry, due to parliamentary procedure.
Instead, it would have killed the government’s legislation, the aim of which is to reform things like the children’s care system and raise educational standards in schools.
Follow politics latest: Reaction to vote
Tonight’s vote was largely symbolic – aimed at putting pressure on Labour following days of headlines after comments by Elon Musk brought grooming gangs back into the spotlight.
The world’s richest man has hit out at Sir Keir Starmer and safeguarding minister Jess Phillips, after she rejected a new national inquiry into child sexual exploitation in Oldham, saying this should be done at a local level instead.
The Tories also previously said an Oldham inquiry should be done locally and in 2015 commissioned a seven-year national inquiry into child sex abuse, led by Professor Alexis Jay, which looked at grooming gangs.
However, they didn’t implement any of its recommendations while in office – and Sir Keir has vowed to do so instead of launching a fresh investigation into the subject.
Jess Phillips exclusive:
Victims can have inquiry if they want one
The division list showed no Labour MPs voted in favour of the Conservative amendment.
Those who backed the proposal include all of Reform’s five MPs and 101 Tory MPs – though some senior figures, including former prime minister Rishi Sunak and former home secretaries James Cleverly and Suella Braverman, were recorded as not voting.
The Liberal Democrats abstained.
Speaking to Sophy Ridge on the Politics Hub before the vote, education minister Stephen Morgan condemned “political game playing”.
“What we’re seeing from the Conservatives is a wrecking amendment which would basically allow this bill not to go any further,” he said.
“That’s political game playing and not what I think victims want. Victims want to see meaningful change.”
As well as the Jay review, a number of local inquiries were also carried out, including in Telford and Rotherham.
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Grooming gangs: What happened?
Speaking earlier in the day at PMQs, Sir Keir Starmer accused Conservative leader Kemi Badenoch of “jumping on the bandwagon” after Mr Musk’s intervention and spreading “lies and misinformation”.
Referring to her time in government as children’s and equalities minister, the prime minister said: “I can’t recall her once raising this issue in the House, once calling for a national inquiry.”
He also said having spoken to victims of grooming gangs this morning, “they were clear they want action now, not the delay of a further inquiry”.
Ms Badenoch has argued that the public will start to “worry about a cover-up” if the prime minister resists calls for a national inquiry, and said no one has yet “joined up the dots” on grooming.
Girls as young as 11 were groomed and raped across a number of towns in England – including Oldham, Rochdale, Rotherham and Telford – over a decade ago in a national scandal that was exposed in 2013.
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