Two investors have initiated a civil lawsuit against cryptocurrency trading company JPEX and other defendants, accusing them of fraud involving 1.6 billion Hong Kong dollars ($208 million). This marks the first civil suit in this high-profile case, with additional suits expected to follow.

Herbert Lam Sung-him and Chan Wing-yan have filed the lawsuit in Hong Kong's district court, each seeking $236,500, according to the South China Morning Post. The lawsuit, filed on June 4, includes three alternative claims, allowing the court to choose the most appropriate course of action.

The defendants named in the suit include JPEX, an affiliated company Web3.0 Technical Support, individuals who allegedly assisted in the scheme, three unnamed wallet holders, and Felix Chiu King-yin, general manager of the JPEX-associated cryptocurrency exchange Coingaroo.

The lawsuit centers on three transactions made by Chan into JPEX wallets in July and August, totaling $110,500 in Tether (USDT) and $130,000 in cash. One of these transactions was in Lam’s name. The plaintiffs claim they were unable to withdraw these funds, discovering that the funds had been transferred out of their wallets within minutes of deposit.

Joshua Chu Kiu-wah, the lawyer representing Chan and Lam, emphasized that a civil suit is currently the only viable method for victims to recover their funds. He noted, “The findings from the civil proceedings may potentially bolster the parallel criminal investigation against the suspects, underscoring the importance of this multifaceted legal strategy for the victims.”

The investigation into the Dubai-based JPEX commenced in September after the Hong Kong Securities and Futures Commission (SFC) identified it as an unlicensed virtual asset trading platform. Eleven individuals were arrested in connection with the case in September, and by June 3, the number of arrests had risen to 73, all of whom have been released on bail.

Among those arrested was social media influencer Joseph Lam Chok, also known as Lin Zuo, who was mentioned by name in the plaintiffs' suit. The Hong Kong police had received 2,265 complaints against JPEX by April, with legislator Johnny Ng Kit-chong stating he was in contact with hundreds of victims and aware of at least 10 more civil suits being considered.

In a related development, U.S.-based cryptocurrency exchange Kraken is reportedly planning a funding round to raise more than $100 million ahead of a potential initial public offering (IPO). According to a June 6 Bloomberg report, Kraken is exploring strategic paths toward global crypto adoption, although it has not specifically commented on a potential IPO.

Kraken is also facing a civil lawsuit filed by the U.S. Securities and Exchange Commission (SEC) in November 2023. The SEC alleges that Kraken operated as an unregistered exchange, making hundreds of millions of dollars from investors in violation of U.S. securities laws.

The convergence of civil and criminal proceedings in these cases highlights the complex legal landscape facing cryptocurrency exchanges and the significant challenges investors face in recovering lost funds. As more victims come forward and additional lawsuits are filed, the scrutiny on cryptocurrency exchanges like JPEX and Kraken is likely to intensify.