2 AAX executives arrested in Hong Kong over alleged fraud amid withdrawal freeze

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Hong Kong police have announced the arrest of two individuals linked to digital asset exchange Atom Asset Exchange (AAX) over misrepresentation to investigators and an attempt to defraud customers.

Top AAX executives Liang Haoming and Thor Chan were arrested in Hong Kong on December 23 on allegations bordering on fraud. The duo had given false information to investigators over the firm’s decision to halt customer withdrawals.

AAX shut down its operations in November on the grounds that it wanted to carry out “system maintenance,” leaving millions of customers unable to withdraw their funds. In the days following the halting of withdrawals, law enforcement agencies received a flurry of reports against the company, with the bulk coming from France, Italy, and Taiwan.

Police allege that the scheduled “system maintenance” was a ruse to defraud millions of users of their digital assets. Despite repeated claims that the company’s withdrawal freeze had nothing to do with FTX’s collapse, the sudden resignation of AAX’s Global Marketing and Communications lead, Ben Caselin, raised eyebrows.

“Through false information, news, and illegal means, the trading platform stopped operating, so investors have failed to get back their virtual asset,” said Kung Hing-fun, an official with the fraud division of the Commercial Crime Bureau.

A third high-ranking official on the radar of law enforcement fled from the country with the firm’s wallet and private keys containing $30 million in digital assets. Hong Kong’s police have confirmed that international investigators are collaborating with them to track down the third executive.

Not FTX related but AAX needs additional capital

AAX claims that it has no exposure to FTX but remains affected by the implosion caused by the “abnormalities” it identified. AAX’s statement to customers that mass withdrawals have put “acute pressure” on the exchange’s balance sheet and to restart normal operations, it is necessary to raise new capital.

“In spite of the threats to our systems that we have observed from malicious actors, we are committed to starting to process withdrawals as soon as we have resolved the capital shortfall,” read AAX’s statement. “Other issues surrounding open positions on derivatives markets, or questions around reward programs will be dealt with fairly and with reason.”

The firm assured users that bad actors had no access to any funds and that significant progress had been made in raising capital. AAX noted that its shareholders had provided a chunk of the required capital after it obtained interest on new investments.

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