Hong Kong police vow to make arrests after Hounax virtual asset trading platform allegedly scams 131 people out of nearly HK$120 million

Hong Kong police launched an investigation on Saturday after more than 130 people claimed a virtual asset exchange platform called Hounax scammed them out of nearly HK$120 million (US$15.4 million), with the force vowing to make arrests soon.

The Securities and Futures Commission (SFC) listed Hounax as a suspicious virtual asset trading platform early this month after it was found to have lied about its ties with a financial institution and a venture capital firm.

“The scammer impersonated investment experts and lured people to invest in virtual currencies through a virtual asset trading platform with promises of high returns,” said Chan Wai-kei, superintendent of the force’s commercial crime bureau. “But when the investors went to withdraw the money, they were unable to do so.”

Chan said police received 88 reports from 131 alleged victims, who claimed they lost nearly HK$120 million. The youngest was 19 and the oldest 78, with a 69-year-old retired woman allegedly suffering the biggest loss of HK$12 million.

The platform, which claimed to be run by a Singaporean company, started operating early this year and appeared to target Hong Kong investors, he added.

Or Wing-yan, chief inspector of the bureau, said the alleged Hounax scammers would reach out to people through social media and WhatsApp, inviting them to join group chats in which “hot tips” were shared.

Those who showed an interest would be instructed to download the company app through a hyperlink and transfer funds to a third-party bank account to top up their investment account.

“In the beginning, the victims would see quick returns in the investment account, but those were just meaningless numbers made up by the scammers to gain their trust,” Or said. “In fact, the moment they transferred the funds to the third-party account, the money was transferred away.”

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When victims tried to withdraw the money, the platform’s “investment managers” would reject the request with different excuses or charge them a “verification” fee of up to 80 per cent of their initial funds, claiming it was a requirement by an international anti-money-laundering organisation, the chief inspector said.

Even when the victims paid the fee, they still could not get the money back, she added.

“The ‘investment manager’ or the customer service people would simply disappear, and the victims would be kicked out of the group chat,” she said. “None of the victims met the scammers in person, and the third-party accounts that received the money were just stooge accounts … all these made the investigation more challenging.”

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Chan said arrests would be made in the near future, adding police had asked telecoms companies and social media platforms to block the website and their accounts.

He noted that police recorded more than 4,300 investment scam cases in the first nine months of this year, a 105 per cent increase over the same period last year, with HK$2.8 billion lost.

Chan called on the public to remain vigilant and avoid blindly following the opinions of so-called investment experts, warning that scammers would often pledge quick, high returns with minimal risk.

One of the residents who reported losing HK$2.8 million told local media she wanted to withdraw the funds after the company issued a statement about the verification fee requirement on November 13.

“I paid the fee, but they said I still needed to wait 60 days to get the money back, or I could pay an administrative fee to get the money in five hours,” she said. “I found it weird as they could have just deducted the amount from my account [instead of asking for more], so I called police.”

Louis Li Sze-chung, a blockchain expert and adviser to tech start-up association 852Web3, said the scamming tactics employed were fairly common.

“It often involves lesser-known platforms, and they will ask you to transfer the funds to a third-party account but that’s already an obvious red flag,” he said. “Normally, you only need to transfer the funds to a client account, which is owned by you, not the company.”

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Li advised non-professional investors to only choose from the SFC’s list of licensed operators. They should also seek advice from friends, professionals or experts, who could be helpful in detecting potential fraud, he suggested.

Gilbert Ng Man-him, a lawyer specialising in virtual assets, said it was challenging for authorities to detect all types of scams due to the vast number of online platforms, but they could step efforts to educate amateur investors.

“Everyone should do their own research on the platforms, the virtual asset and the products before investing,” he said.

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Lawmaker Johnny Ng Kit-chong, who is helping some of the victims, called on the SFC to increase contact with unlicensed platforms to detect any potential fraudsters earlier and step up public education efforts.

The government should also devise strategies to combat organised criminal activities at the source, he said.