Hong Kong police have opened an investigation into cryptocurrency platform JPEX following allegations of massive fraud that could rank among the biggest such cases in the city's history.

Over 2,000 investors have filed complaints claiming combined losses of around $166 million from the trading platform. The case represents a major test of Hong Kong's newly implemented regulations for the virtual asset sector.

Last week, the city's Securities and Futures Commission revealed that JPEX had been operating without the required license for cryptocurrency platforms since the rules took effect in June. JPEX claimed it tried to comply but was obstructed by regulators.

Many affected users were novice crypto traders drawn in by promises of high investment returns. JPEX relied heavily on influencer endorsements and advertising in Hong Kong's metro to attract customers.

Police arrested several JPEX promoters, including insurance salesman Joseph Lam and YouTube personality Chan Yee. Authorities have since suspended JPEX's Hong Kong operations.

Hong Kong Chief Executive John Lee stated regulators will closely oversee the situation and protect investors. The city mandated licensing for all virtual asset platforms last year as it aims to become an Asian blockchain and crypto hub.

However, experts warn the current regulations may be inadequate to fully prevent illegal platforms and safeguard consumers. Devastated JPEX users have formed support groups online like "JPEX Sufferers."

While registered in Dubai, JPEX claimed to have global offices. But its Hong Kong and Taiwan addresses are not 1 operations, prompting accusations of deception.

As investigators work to unravel the scale of customer losses, the case spotlights Hong Kong's oversight and regulation of the high-risk cryptocurrency sector. Authorities face pressure to implement stronger protections for traders impacted by suspected fraud.