Since the Securities and Futures Commission (SFC) criticized JPEX on September 13th for not applying for a license and having many suspicious practices, 12 people have been arrested, and 2,392 people have reported losses totaling nearly HKD 1.5 billion (as of Sept 27th).

Many people wonder why I haven't commented on the JPEX incident, even though it seems to be within my "territory" both in terms of scope and geographical location. I initially hesitated to discuss JPEX due to certain considerations, but since the community has asked, I've decided to offer some thoughts.

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I've always believed that the best way to learn about blockchain is to use it. It's hard for me to comment on a product I haven't used, so I decided to go through the process and gain firsthand experience. However, I don't recommend that everyone try it casually, as it may be a risky path.

I used the Cloudflare WARP 1.1.1.1 VPN with a Hong Kong IP address to successfully access the JPEX website. I registered via email, received a verification code, and completed the registration for a new account. Upon logging in, the first screen displayed the "DAO Stakeholder Dividend Scheme" public vote. I selected "No" and successfully voted. It's worth noting that this differs from what I found online, where it was mentioned that selecting "No" would return users to the beginning for a revote. It is possible that the platform has been updated since then. I then attempted to deposit 0.0001 ETH and, after approximately 5 minutes, the page refreshed to display my assets. However, I did not receive a confirmation email. After that, I used a market order to convert all of my assets into 0.15902567 USDT.

The entire process had a clear and logical interface, providing a smooth user experience. No identity verification was required, and I was able to use it with a Hong Kong IP address.

Members of the DHK dao Telegram group have been discussing JPEX since 2021, raising suspicions and urging caution. Hopefully, all DHK dao members can navigate through this situation safely. 

I have no credit in this matter, as I was not aware of JPEX's details and had a "CD-ROM" attitude (read-only) towards it. The vigilance towards JPEX is the power of the community, and any credit goes to the community.

I haven't discussed JPEX in the past two years mainly because I didn't understand it. I didn't know who founded it, where it was registered, or if there were any behind-the-scenes investors. In other words, I knew very little, probably less than what the public knows, and my principle is not to write about things I don't understand.

Through this incident, I hope to remind Key Opinion Leaders (KOLs) to prioritize “KO” over “L”. If you don't understand something, it's best to refrain from discussing it, even if it's a trending topic. Furthermore, it's crucial not to readily endorse or promote it. Always remember that influence is a tool, not the final destination. With great influence comes great responsibility. Use it wisely to make the world a better place.

People who create content, sell products, or provide services know that even negative reviews can generate publicity and societal attention. Minor controversies can actually be helpful, especially for those skilled in managing online communities. Some may even seek collaboration with others to criticize themselves, then calmly read out a response prepared by a public relations firm. They may make minor policy adjustments, foster acceptance of societal doubts, and maintain a positive image by demonstrating effective problem-solving.

As for which organizations understand this concept and have abundant resources to carry it out, I dare not say, to avoid potential legal issues.

There's nothing worse than having no one discuss your work. Have you ever seen mainstream media or the general public discussing "web3dom" even in a critical manner? If not, that might be the reason for my melancholic expression 😞. When dealing with subpar products, it's important to either provide solid evidence or simply maintain a cold silence, as it might be a more effective approach.

I've considered whether I could help more people avoid these pitfalls by educating the public further.

I asked myself and think I've done my utmost to explain the principles and methods of managing one's assets independently. For instance, approximately three years ago, I published an article in the Apple Daily titled "Multiple Choice: Should You Rely on Gold or 24 Words to Save Your Life?" It discussed managing personal assets using mnemonic phrases. Furthermore, I've explained the drawbacks of relying on centralized systems for asset management (not that there are no benefits, but I don't need to expound on them), and I've shared various doubts and insights I've had during this transformation process. There are many related articles, most of which are included in "Moneyverse: How money works in the multiverse"

You may ask, why can't I skip the principles and just provide a list of reliable exchanges? I have indeed listed more reliable exchanges before, but I cannot condone skipping the explanation and telling everyone, "Just use this one." Moreover, a moment of reliability doesn't guarantee continuous reliability; users need to continuously evaluate. I understand that many people simply want answers without explanations, but this attitude contradicts my belief in "Don't trust. Verify." Even if everyone says, "Alright, we trust you," and even if I have the ability to tell everyone to just use a certain exchange, I won't be happy about it, and I'll refuse to use that ability.

You asked again, can't I be less ungrounded and use the way "normal people" receive information, talking about topics "normal people" are interested in? People just want to buy coins. Wanting to make money is a common human desire.

It's a good question. I often ask myself if I could present the ideas expressed in my articles through platforms like YouTube, Podcasts, or simple summaries. My answer is, I could try, but I personally lack the capability and the time. However, I always release my articles under the CC-BY public license, so anyone can remix them. Why must it always be me? For instance, last month, TTS fighter transformed my weekly report into a YouTube video using AI narration. Rather than resenting the content being "stolen", I find it great. The world should be like this.

Being ungrounded in medium might be due to my limitations, but being ungrounded in content is intentional, even my core belief. The "ungrounded" I'm referring to here doesn’t mean living in luxury houses, driving fancy cars, or dining at high-end restaurants (you can criticize me for being out of touch only when you live more simply than I do, know bus routes better, and are more passionate about small shops). It means "ungrounded from the jurisdiction of surface-level governance", breaking away from traditional notions, avoiding reliance on systems, and using decentralized technologies like blockchain to own assets, publish content, and embody democracy.

Thus, I particularly don't want to discuss JPEX from the perspective of "fighting for the people" or criticizing the government for lax regulation. Otherwise, no matter how successful, it would only end up reinforcing the narrative of centralization.

You further ask, aren't exchanges the bridge to the traditional system? Even if one wants to "rise above the ground", one has to first use exchanges to convert fiat money to cryptocurrency, right?

Not necessarily. Hongkongers are known for their adaptability. Hong Kong is one of the few cities on Earth where a multitude of ground-operated cryptocurrency OTC (over-the-counter) boutiques can be found, especially in Mongkok. Their operation is similar to the numerous RMB OTC boutiques found everywhere in the city. You give them one currency, they give you another of equal value. It's straightforward and doesn't need to be overly complicated. Through these boutiques, one can easily convert cash into Bitcoin, Ethereum, etc., commonly referred to as "depositing funds." By using a self-managed wallet, one can truly hold their assets in their own hands. Conversely, one can also "withdraw funds" through these OTC boutiques, converting cryptocurrency back to cash for everyday expenses. This is a method I often use.

Many people believe that the larger a company, the more reliable it is. They assume that a seemingly giant exchange would naturally be more reliable than a seemingly tiny OTC boutique. Regardless of whether these size perceptions are misconceptions, even if they are accurate, OTC boutiques are often much more trustworthy than exchanges. This is mainly because the primary risk stems from asset custodianship. When you entrust an exchange with your assets, and if they recklessly invest and lose your assets, get (allegedly) hacked, run away, or simply play dead, you can't retrieve your entrusted assets. However, with OTC boutiques, the transaction is straightforward without any custodial elements involved.

Thus, unless the OTC boutique gives you counterfeit notes or tries to deceive you on the spot after receiving your funds, there's little room for fraud, and with proper knowledge, you can avoid these pitfalls. Even the OTC boutique owners arrested by the police during the JPEX incident would likely find it hard to scam assets from their customers. However, if the cryptocurrency obtained from these OTC boutiques is directly deposited into JPEX, that's a different story.

If it's absolutely necessary to use an exchange, always adhere to the principle of "not your key, not your coins". After conversion, retrieve your assets to a self-managed wallet as soon as possible. At most, only retain a small amount for unforeseen needs and never entrust the majority of your assets to an exchange.

Even for someone like me who rarely uses the MTR, I've seen the massive advertisements of JPEX several times. After the incident erupted, the MTR was held accountable. Their response was that "since June of last year, there have been no JPEX advertisements within the MTR network". It's admirable how thick-skinned their PR response was. Do they imply that all affected JPEX customers joined only after June of the previous year?

While I don't agree with the infantile mentality that calls for government intervention whenever an investment fails, believing that investment decisions lie with the individual and they should primarily bear their own responsibilities, I'm truly fed up with the MTR's tactic of dodging responsibility when things go wrong, their evasive style. In the past, MTR has refused several advertisements for reasons such as screening specific stances during social movements, a 2019 advertisement showing two men holding hands implying LGBTQ+ content, and as far back as 2011, when certain statements from the Civic Party, such as "You are discontent with Donald Tsang" and "You are discontent with collusion between officials and businessmen", were considered to have "derogatory implications" towards others. Yet, blatantly misleading phrases like "Japanese cryptocurrency exchange" and massive advertisements over 20 feet tall can easily cover the entire MTR station as long as the advertising fees are paid. It's impossible for anyone passing through Central, the heart of the financial district, to miss them. No wonder that even in last year's economic downturn, MTR's advertising revenue still reached over 800 million Hong Kong dollars.

When they want to censor, they claim responsibility. When it comes to making money, misleading advertisements are still released. When there's an issue, they shift the blame to third-party contractors. But they never once say, "Sorry, the previous advertisement was misleading. Please be cautious, citizens."

On 2023.09.20, JPEX issued an announcement, stating that they would distribute a total of 400 million USD in "DAO Stakeholder Dividends" over two years to users, inviting users to purchase stakes with assets in the platform. Newly deposited funds could even buy stakes at a 1:2 ratio. What's even more audacious is that starting from 2023.09.22, JPEX has been publishing daily "referendum" results. As of today, 68% of votes agree with the proposal. Their creativity and fantasy are simply astounding.

Frankly, I used to think that aside from having lots of money and strong execution, JPEX had no originality in their tactics. But the "DAO Stakeholder Dividend Scheme" changed my perception. I must admit JPEX is incredibly creative, comparable to novelists, adept at blending fiction with reality, making it difficult to distinguish truth from falsehood. Perhaps users who don't understand DAO might genuinely believe it.

The government, adept at distorting facts, has now encountered a formidable opponent in JPEX. It remains to be seen who will prevail.

With falsely reported licenses, and pretending to be a Japanese exchange, they strutted around the market, easily purchasing vast amounts of misleading advertisements everywhere. Endorsed by a patriotic Hong Kong star family, even after over two thousand complaints of deception, their website still operates as usual. They conduct business blatantly, and assets continue to flow freely, even fulfilling Hongkongers' long-held wish for a "referendum."

While they build bridges without consequences, at the same time, in the same city, activists who have dedicated half their lives to social justice are either imprisoned or wanted with high bounties as if they are murderers. A genuine newspaper company with over twenty years of history, employing over two thousand people, was shut down overnight. Their website completely disappeared, and their senior executives might never regain their freedom. Dissidents who merely express political views are accused of endangering national security, and are targeted by the masses.

I'm confused about how the world operates, who the so-called rule of law is protecting, and whether Hong Kong is a jurisdiction of freedom or centralization.

I'm not always critical of the government. For instance, I disagree with many of the accusations leveled against the Securities and Futures Commission (SFC) this time around. I think the SFC has acted competently and appropriately. In fact, many government departments, public servants in charge of enforcement, and outsourced staff perform well most of the time. The public sector generally operates efficiently and methodically. The problem lies at the top of the system.

Apart from JPEX, there's another even more significant matter that happened in my territory that I've never commented on, and that is the Hong Kong government's high-profile embrace of web3, with its claims of wanting to become a "virtual asset management hub." Some might think I'd be pessimistic about this, but in reality, I'm quite optimistic. I'm confident that the SFC, along with Hong Kong's professional talents in finance, law, and technology, can handle this well. Trustworthy exchanges will emerge one after another, and when the bull market comes, funds from mainland China and even the Belt and Road regions will flood in, turning Hong Kong into a speculation paradise once again. The only issue is, for me, this kind of prosperity equates to decline.

I'm not worried that the JPEX incident will hinder Hong Kong's plans to become a "virtual asset management hub." On the contrary, I'm more concerned that the incident will further reinforce the narrative that "Chinese people need to be managed". The professionals won't disappoint in this regard, effectively managing things. Chinese Hongkongers will continue to live in a highly regulated environment, enjoying high-quality life while casting aside even higher values.

web3dom - of web3 and freedom is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.