Compliance Risks for Crypto KOLs in a Regulated Market: How Hong Kong Legal Precedents Redefine Liability and Due Diligence Expectations

Hong Kong's rapid evolution into a global digital asset hub has brought both opportunity and scrutiny, particularly for Key Opinion Leaders (KOLs) in the cryptocurrency space. Over the past two years, a series of high-profile regulatory actions and court rulings have redefined the legal landscape, imposing stricter liability standards and due diligence obligations on influencers promoting virtual assets. These developments, driven by the collapse of the JPEX platform and subsequent enforcement actions, underscore a paradigm shift in how Hong Kong balances innovation with investor protection.

The JPEX Scandal: A Catalyst for Legal Clarity

The JPEX case, a $205.8 million fraud involving over 2,700 investors, has become a landmark in Hong Kong's regulatory history. The platform, which operated without a license under the Securities and Futures Ordinance (SFO) and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), leveraged social media influencers to promote its services. In 2024, the Hong Kong District Court ruled in Chan Wing Yan and Another v. JP-EX Crypto Asset Platform Ltd that JPEX breached its trust obligations by misappropriating users' USDT deposits according to the judgment. The judgment affirmed that cryptocurrency qualifies as "property" under Hong Kong law and is subject to trust principles, a precedent later reinforced in Re Gatecoin Ltd [2023] HKCFI 914.

Crucially, the court's analysis extended to the role of KOLs. Joseph Lam Chok, a prominent influencer, was among 16 individuals charged with conspiracy to defraud. Legal experts argue that Lam's promotion of JPEX-despite explicit warnings from the Securities and Futures Commission (SFC)-demonstrated a failure to exercise due diligence, a factor that could influence sentencing. This case signals that KOLs are no longer shielded from liability by their role as "influencers"; instead, they are now subject to the same regulatory expectations as traditional financial intermediaries.

Regulatory Frameworks: From Licensing to Liability

Hong Kong's regulatory response to the JPEX scandal has been twofold: tightening licensing requirements for virtual asset service providers (VASPs) and clarifying liability for promoters of unlicensed platforms. Under the mandatory licensing regime, introduced in June 2023, all VASPs must comply with the SFO and AMLO, including stringent AML/KYC protocols and asset segregation rules. The SFC's "A-S-P-I-Re" roadmap, launched in February 2025, further expanded oversight to include virtual asset dealers and custodians.

For KOLs, the implications are clear. The SFC's Supplemental Joint Circular, issued in September 2025, emphasizes that influencers promoting unlicensed platforms may face accountability under existing AML/CTF frameworks. While the circular does not explicitly name KOLs, it underscores that "all parties involved in the promotion of virtual asset services must ensure compliance with licensing and investor protection requirements." This aligns with the SFC's public warnings against unlicensed platforms, which now include a list of approved VASPs to aid due diligence.

Legal Innovations and Enforcement Tools

Hong Kong's courts have also innovated to address the unique challenges of digital assets. In 2025, a tokenized injunction was issued to freeze cryptocurrency wallets linked to the JPEX fraud, embedding court orders directly onto the blockchain. This approach, which mirrors similar efforts in Singapore and the UK, reflects a broader trend toward leveraging technology for enforcement. For KOLs, such tools mean that regulatory actions can now target not just platforms but also individuals who facilitate their operations through promotion.

The legal standards for due diligence have also been clarified. The Chan Wing Yan ruling emphasized that VASPs-and by extension, their promoters-must demonstrate "safe custody" of client assets according to the court's analysis. This includes not only technical safeguards like cold storage but also procedural diligence in verifying the legitimacy of the platforms they endorse. The SFC's four-pillar due diligence strategy-Know Your Transaction (KYT), source of funds analysis, counterparty intelligence, and regulatory screening-now serves as a benchmark for KOLs.

The Road Ahead: Compliance as a Strategic Imperative

For crypto KOLs operating in Hong Kong, the post-JPEX era demands a proactive approach to compliance. The SFC's A-S-P-I-Re roadmap and the HKMA's Stablecoins Ordinance (August 2025) indicate that regulatory scrutiny will only intensify. Influencers must now conduct rigorous due diligence on the platforms they promote, including verifying licensing status, AML protocols, and asset custody practices. Failure to do so could result in criminal charges, as seen in the JPEX case, or civil penalties under the AMLO.

Moreover, the SFC's recent emphasis on "risk-tiered offerings" suggests that KOLs endorsing advanced products like derivatives or staking services will face even higher scrutiny. This aligns with global trends, where regulators are increasingly holding influencers to the same standards as traditional financial advisors.

Conclusion

Hong Kong's legal and regulatory evolution has redefined the role of crypto KOLs, transforming them from mere promoters into active participants in the compliance ecosystem. The JPEX scandal and subsequent court rulings have established a clear precedent: influencers who fail to exercise due diligence in promoting unlicensed platforms will face significant legal and financial risks. As the SFC and HKMA continue to refine their frameworks, KOLs must adapt by integrating robust compliance practices into their operations. In a market where innovation and regulation walk hand in hand, due diligence is no longer optional-it is a necessity.