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DeFi

Hong Kong police arrest 27 in $46m deepfake crypto romance scam

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Hong Kong police have dismantled a deepfake romance scam that swindled men out of $46 million through fake cryptocurrency investments.

According to a local report, law enforcement in Hong Kong cracked down on a multinational crypto romance scam, which targeted victims from Hong Kong, Singapore, mainland China, and other regions, and was run by a fraud syndicate using advanced deepfake technology. 

Police arrested 27 people, including university graduates and suspected Sun Yee On triad members, who helped run the scheme and set up fake trading platforms that tricked victims into investing in bogus cryptocurrency investments.

Romance scams, sometimes called pig butchering scams, involve scammers posing as love interests to gain someone’s trust. They eventually convince their victims to invest in fake cryptocurrency investments promising lucrative returns, then vanish with the money.

The inner workings of the scam

The syndicate used AI-generated photos of attractive women to initiate online romantic relationships with unsuspecting men. The victims were later persuaded to invest in what they believed to be legitimate cryptocurrency platforms, only to find out later that they could not withdraw any funds.

Senior Superintendent Fang Chi-kin, who heads the New Territories South regional crime unit, said that the syndicate’s victims were tricked even during video calls, as deepfake technology was used to replace the scammers’ appearances and voices with those of attractive women.

Victims were then persuaded into making investments in cryptocurrency via the fake trading platforms and were even shown fake transaction records that claimed to show profits on their investments.

“They even discussed future plans with the victims, creating a false sense of happiness to encourage them to continue investing,” Fang added.

The fraudsters divided their operations into various roles, including scam operations, technical support, and accounting, police said. Recruits, often university graduates, were hired to manage English-speaking or Mandarin-speaking victims and were given training manuals outlining how to build trust with victims, particularly in the area of investment.

Per the report, each fraudster involved in the syndicate could earn tens of thousands of Hong Kong dollars per month, with some earning over HK$100,000. The police are continuing investigations and have not ruled out further arrests.

The scammers had been operating since October 2023 and managed to defraud victims out of HK$360 million (roughly $46 million.)

Romance scams on the rise

Cryptocurrency scammers are getting more sophisticated with their techniques, and romance scams are just one of their tactics. The rise of AI is adding to the challenge, helping scammers pull off more convincing schemes.

Over the years, agencies like the United States Federal Trade Commission and the Federal Bureau of Investigation have warned of the rise in romance scams, particularly those involving cryptocurrency. 

A study led by University of Texas finance professor John Griffin revealed that romance scams caused over $75 billion in losses from January 2020 to February 2024, with many of the scammers operating out of Southeast Asia. In a recent case, a U.S. citizen filed a lawsuit after losing $2.1 million in Bitcoin to one of these pig butchering scams run by a crime syndicate in the region.

Meanwhile, in April, the Virtual Currency Unit within the Brooklyn District Attorney’s Office uncovered a similar scheme targeting victims all across the U.S.

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Hong Kong’s SFC set to approve batch of new crypto licenses by end of year

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The Hong Kong Securities and Futures Commission plans to approve a batch of new crypto licenses by the end of this year. So far, there are 11 crypto platforms being considered for licenses.

In an interview with news outlet Hong Kong 01, CEO of the China Securities Regulatory Commission, Liang Fengyi, announced that the SFC will be giving out licenses in batches to Virtual Asset Trading Platforms.

The SFC has recently issued three licenses for crypto exchanges operating in the region, including the Hong Kong Virtual Asset Exchange, OSL Exchange and HashKey Exchanges.

Apart from the three licensed platforms, 11 other platforms have applied for an SFC-issued licenses and are currently awaiting approval.

Liang Fengyi explained that regulators have carried out the first phase of on-site reviews and have asked applicants to make the necessary corrections.

She stated that the SFC aims to make significant progress on regulating virtual assets by the end of the year, by issuing a batch of licenses for VATPs.

“Applicants who do not meet the requirements will lose their qualifications for licensing, while applicants who meet the requirements will be granted a license conditionally,” said Fengyi.

As part of their 2024-2026 strategy, Liang Fengyi said that Hong Kong regulators will promote the development of regulations for virtual asset trading platforms, support the tokenization of traditional products, and using regional chains and web3 basic technologies.

“The entire framework will be completed at least next year,” she said.

In regards to cryptocurrency over-the-counter services, Liang Fengyi pointed out that the CSRC has created a new licensing system for crypto OTC custody services to receive feedback from industry players.

In mid Sept. 2024, Hong Kong’s Securities and Futures Commission began working together with the Customs and Excise Department issuing licenses for over-the-counter crypto trading services. At the time, crypto platforms in Hong Kong struggled to get licenses due to not meeting government standards on client asset management and failure to properly anticipate cybersecurity risks.

On Sept. 30, ZA Bank became the first virtual assets bank in Hong Kong to gain a license from the SFC after a year-long review process.

Licenses have become vital for crypto platforms operating in Hong Kong as financial regulators have tightened restrictions on unlicensed exchanges and the development of a regulated crypto ecosystem.

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Hong Kong’s ZA Bank becomes first virtual bank to get SFC license

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ZA Bank becomes the first Hong Kong digital-only bank to gain a license from the Securities and Futures Commission for Type 1 regulated activity.

According to Hong Kong news outlet HKEJ, on Sept. 30 a ZA Bank spokesperson said that ZA Bank has received approval from the China Securities Regulatory Commission to allow the company to add new conditions for virtual asset transactions to its Type 1 license.

This news follows a year-long process the bank has undertaken since Hong Kong financial regulators tightened restrictions on unlicensed exchanges and the development of a regulated crypto ecosystem.

The bank plans to implement an investment fund service and operate under crypto regulations set by the country’s financial regulators.

CEO of ZA Bank, Rockson Hsu, stated in a press release that the firm remains committed to becoming a “game changer” for the banking sector two years after its official launch. He also highlighted the bank’s plan to launch an investment fund service.

“We look forward to further enhancing users’ experience with our game-changing investment fund services!” said Hsu.

Hong Kong introduced new regulations in 2022, requiring all crypto exchanges operating in the city to submit license applications by February 2024. Since then, over 24 companies struggled to get licenses. By Aug. 2024, around 12 applications have been withdrawn, including those from Bybit, Huobi HK, and OKX.

In May, 2024, the SFC warned investors to only use licensed platforms. The country’s cryptocurrency regulations came into effect in June 2023.

On July 18, 2024, ZA Bank began offering banking services to stablecoin issuers after the Hong Kong Monetary Authority unveils a list of approved companies for its stablecoin sandbox initiative.

In a press release on July 18, ZA Bank partnered with RD InnoTech, one of the first companies listed by the HKMA for sandbox trials. At that time, ZA Bank managed to onboard around ten additional stablecoin clients.

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Công nghệ

Goldman Sachs-backed blockchain infrastructure provider Blockdaemon eyes 2026 IPO: report

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Blockchain infrastructure provider Blockdaemon, which powers institutional clients such as OneDegree and CoinShares, may be eyeing a public listing in 2026.

Crypto infrastructure provider Blockdaemon, backed by Goldman Sachs, SoftBank, and Kraken, among others, is weighing in on going public in 2026.

In an interview with Bloomberg, the company’s founder and chief executive Konstantin Richter indicated that the company, currently valued at around $3.3 billion, would assess market conditions in 2025 before making a decision.

Founded in 2017, Blockdaemon has built a client base of over 400 institutional customers. In September 2021, the company secured $155 million in a Series B funding round from backers like Matrix Capital Management, Sapphire Ventures, and Morgan Creek Digital.

Richter said Hong Kong currently offers a more favorable environment for a listing compared to the U.S., where the regulatory landscape for crypto is “really bad.” However, he expects the situation in the U.S. to improve after the November elections, regardless of the result.

The Blockdaemon CEO, who sees Asia as a key growth area for the firm, noted that the company plans to double its team in the region within a year, though exact figures were not disclosed.

Despite Hong Kong’s attractiveness for crypto listings, startups in the city continue to face challenges. Web3 firms still seem to struggle to open bank accounts due to stringent regulatory requirements and the cautious stance of traditional banks. As crypto.news reported earlier, Johnny Ng, a member of the Hong Kong Legislative Council, has called on authorities to improve the regulatory environment, but these issues still deter many foreign companies from establishing local branches.

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Hong Kong eyes SFC involvement in crypto OTC licensing: report

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Hong Kong is reportedly considering involving the local securities regulator in licensing over-the-counter crypto trading services.

Over-the-counter crypto trading services in Hong Kong might soon come under the joint oversight of the Securities and Futures Commission and the Customs and Excise Department, as the city seeks to tighten its regulatory framework.

According to a South China Morning Post report, which cites persons familiar with the matter, the SFC is exploring a new licensing regime for OTC crypto services, working alongside the C&ED to address regulatory gaps identified following the JPEX scandal, which resulted in losses of more than $200 million.

Previously, OTC services were solely regulated by the C&ED, but recent discussions indicate a shift toward a combined regulatory approach. The SFC has been consulting industry players about the potential new regime and has also been evaluating regulations for cryptocurrency custodian services. These discussions are still in early stages and subject to change, the sources said.

In mid-August, crypto.news reported that the SFC identified unsatisfactory practices during on-site inspections of 11 “deemed-to-be-licensed” crypto exchanges, raising doubts about their ability to meet full licensing requirements. The investigation revealed that some exchanges were overly reliant on a small number of executives to manage client asset custody, while others were not “properly guarding against cybercrime risks.”

Hong Kong’s regulatory landscape has been evolving, with new licensing requirements for crypto exchanges and the introduction of crypto exchange-traded funds. However, concerns persist among local players. In March, Alessio Quaglini, co-founder and CEO of crypto custodian Hex Trust, voiced worries about proposed OTC regulations, suggesting that stringent requirements could drive businesses like Hex Trust to relocate to more crypto-friendly jurisdictions.

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Theo Crypto News

Bitcoin

Crypto millionaires population up 95% in one year, survey shows

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The number of crypto millionaires nearly doubled in 2024, reaching 172,300 as spot Bitcoin ETFs and other crypto assets surged.

The global population of crypto millionaires has surged 95% over the past year, driven by the rise of spot Bitcoin exchange-traded funds and other cryptocurrencies, according to a new research report by New World Wealth and Henley & Partners.

The report reveals that 172,300 individuals worldwide now hold more than $1 million in crypto, nearly doubling from 88,200 in 2023. Data shows that during the same period, the number of Bitcoin (BTC) millionaires more than doubled to 85,400.

Crypto millionaires | Source: New World Wealth and Henley & Partners

Crypto wealth has also expanded significantly, with 325 individuals now classified as crypto centimillionaires —those holding $100 million or more in crypto — and 28 crypto billionaires. The report attributes such a rapid surge to the growth of spot Bitcoin ETFs, which have amassed over $50 billion in assets since their January launch, igniting a surge in institutional participation.

Commenting on the data in an interview for CNBC, New World Wealth’s head of research Andrew Amoils pointed out that of the six new crypto billionaires created in 2023, five owe their wealth to Bitcoin, underscoring its “dominant position when it comes to attracting long-term investors who buy large holdings.”

Investors seeking crypto friendly countries

Crypto is reshaping not just wealth but also the demographics of where the rich live and work. Analysts at Henley & Partners note that many newly wealthy crypto individuals are seeking to relocate to tax-friendly and crypto-friendly jurisdictions, saying they have seen a “significant uptick in crypto-wealthy clients seeking alternative residence and citizenship options.

To rank countries based on their tax and regulatory environments, Henley & Partners developed an index, placing Singapore in the top spot due to its “supportive banking system, significant investment, comprehensive regulations such as the Payment Services Act, regulatory sandboxes, and alignment with global standards.”

Following Singapore, Hong Kong ranks second, with the United Arab Emirates and the U.S. also among the top destinations.

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Hong Kong lawmaker calls for legal framework to regulate DAOs

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A Hong Kong lawmaker calls for a legal framework to regulate DAOs following a court ruling on a decentralized organization.

Hong Kong might begin developing a regulatory framework for decentralized autonomous organizations, as lawmaker Johnny Ng Kit-chong advocates for clearer rules to improve stability in the web3 sector.

According to a report from the South China Morning Post, Ng, a member of the Legislative Council, believes that establishing a legal framework could benefit the region by attracting international talent and investment, reinforcing Hong Kong’s position in the rapidly evolving crypto landscape.

It is not the first time Ng has urged regulatory clarity for DAOs. In July, he also publicly called for the creation of clear policy and regulatory recommendations for DAOs to “support and regulate the healthy development” of these entities in Hong Kong.

However, the latest call comes shortly after Hong Kong’s High Court, in what Ng described as a “landmark moment, marking the world’s first judicial examination of a DAO,” ordered six defendants in the Mantra DAO case — alleging misappropriation of HK$6 billion (approximately $767 million) — to disclose financial details.

“I hope the government can improve the ecology of web3 and regulate DAOs legally so that more people in the industry will come to Hong Kong to develop their projects and bring in capital and talent.”

Johnny Ng Kit-chong

Ng has long been a vocal proponent of crypto-friendly regulation in Hong Kong. In early August, crypto.news reported that Ng emphasized the need for the city to intensify its efforts in the crypto space by expanding virtual banking services, particularly as web3 startups continue to face challenges in accessing financial services.

Ng has proposed that virtual banks should better cater to the needs of web3 companies and accelerate the development of Hong Kong’s digital ecosystem, asserting that “virtual asset policies have become the focus of global government discussions.”

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Hong Kong’s crypto ambitions tested by licensing issues: report

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Hong Kong’s crypto hub ambitions face hurdles as more than a dozen exchanges struggle to secure full licenses due to regulatory concerns.

Cryptocurrency exchanges in Hong Kong seem to be grappling with challenges in securing full licenses as the city pushes to become a crypto hub, per a Bloomberg report, which cites people familiar with the matter.

The city’s Securities and Futures Commission has reportedly identified unsatisfactory practices during on-site inspections of 11 “deemed-to-be-licensed” exchanges, raising doubts about their ability to meet full licensing requirements. The investigation revealed that some exchanges were overly reliant on a small number of executives to manage client asset custody, while others are not “properly guarding against cybercrime risks,” the report says.

The exchanges under scrutiny reportedly include big names such as Crypto.com and Bullish as well as local trading platforms like HKbitEX and PantherTrade.

So far, only two platforms — OSL and HashKey — hold full licenses in Hong Kong. While the SFC aims to issue additional licenses by the end of 2024. the process has already led to the withdrawal of 12 applications, including those from Bybit, Huobi HK, and OKX.

Hong Kong scrutinizes regulation for crypto exchanges

The SFC’s findings emerge as the regulator intensifies its efforts to enforce strict compliance among crypto platforms, with a particular focus on safeguarding client assets and enforcing robust know-your-client protocols.

This heightened scrutiny follows a scandal involving JPEX, an unlicensed crypto platform accused of defrauding over 2,600 victims of more than $200 million. The SFC previously reported that JPEX and crypto influencers had made false or misleading claims on social media, falsely suggesting that the exchange had applied for a virtual asset trading platform license in Hong Kong.

However, the regulator later highlighted that JPEX had not submitted any such application, despite its assertions of being a “licensed and recognized platform for facilitating the trading of digital assets and virtual currency.”

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Theo Crypto News

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Web3 challenges lead Hong Kong official to push for virtual bank expansion

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Hong Kong legislator Johnny Ng has called for an expansion of virtual bank services to address hurdles faced by web3 startups in the region.

Hong Kong should embrace a more crypto-friendly approach by expanding virtual banking services as web3 startups face ongoing hurdles in accessing financial services, Johnny Ng, a member of the Legislative Council of Hong Kong, said in an X post on Aug. 9.

Ng emphasized the need for virtual banks to diversify their services and proposed the establishment of dedicated crypto-focused banks, referring to a report by the Hong Kong Monetary Authority that highlighted ongoing difficulties web3 companies encounter when attempting to open bank accounts in the region. “The survey showed that web3 firms had difficulties in opening accounts, resulting in inefficiency in developing business locally,” Ng said.

Per Ng’s proposals, virtual banks should focus more on the needs of web3 companies and accelerate the development of Hong Kong’s digital ecosystem, stating that “virtual asset policies have become the focus of global government discussions.”

Web3 firms struggle with banking challenges in Hong Kong

Web3 startups in Hong Kong have encountered challenges with opening bank accounts due to stringent regulatory requirements and the conservative approach of traditional financial institutions toward the crypto space.

According to the HKMA’s report, out of over 120 web3 firms that established their presence in Hong Kong in 2022, around 95% faced difficulties opening accounts with virtual banks. Moreover, 70% of these companies were required to have shareholders or directors visit Hong Kong multiple times, while 60% were asked to maintain fixed deposits. Additionally, 54% of the firms took six months or more to open an account, with nearly 20% taking between two to five months, and 3% were refused altogether.

Ng urges Hong Kong’s authorities to advance their efforts focused on web3 adoption, saying that if the city wants to become the web3 center, it should “promote the development of the entire chain and ecosystem as soon as possible.”

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Theo Crypto News