Two executives from troubled crypto exchange AAX have been arrested by Hong Kong police.
Former CEO of AAX Liang Haoming, and AAX founder Thor Chan were arrested on 23 December, accused of fraud and misleading the police.
AAX had halted its services on 13 November, following what it said was a malicious attack, claiming the firm was unable to verify customer balances and allow them to withdraw. One day later, AAX cited a glitch in the exchange’s system upgrade.
AAx’s vice president for global marketing and communications Ben Caselin announced his resignation. In a now deleted tweet, Caselin wrote “the brand is no more and trust is broken.”
Hong Kong police accused the pair of claiming there was “system maintenance” as an excuse to delay customers from withdrawing. The platform has been unaccessible since, leaving 2 million users in the lurch. Local police have received 337 reports from victims n China, Taiwan, Italy and France.
Authorities allege that one of the executives purposely lied to police about the timeline of his activities in the company. Both executives’ bank accounts and properties have been frozen as well as two AAX bank accounts.
A third executive holding an AAX wallet and private keys containing $30 million in digital asset has fled abroad according to police, which have seized his Hong Kong properties.
Hong Kong ambitions
Hong Kong has been vying to be Southeast Asia’s digital asset hub, saying it wants to develop a “vibrant sector and ecosystem for virtual assets” in the territory.
Read more: Singapore, Hong Kong Jostle for Crypto Hub Status
“It is great to see the rising number of crypto hubs in places like Singapore and Hong Kong,” Adrian Wang, CEO of Metalpha, a global crypto derivatives service provider headquartered in Hong Kong with key offices across Asia, told Blockhead. “The city has a desirable tax system and a well-run capital market. I look forward to seeing more policy developments in the structured derivatives products in the near future.”
However, Hong Kong is still making a conscious effort to be cautious in the space. Earlier this month, Hong Kong’s Securities and Futures Commission (SFC) warned investors that crypto investment products offering high interest returns and guaranteed additional assets at fixed rates are risky, as there are few investor protection measures in place.
Read more: Hong Kong Regulators Sound Alarm on Interest-Bearing Crypto Products
With the SFC issuing cautions and local police taking a firm stance against crypto criminals, Hong Kong is shaping up to be a viable and safe rival for Singapore’s crypto ambitions.