Two individuals were arrested by the Hong Kong police on suspicion of defrauding and misleading users of the now-defunct AAX exchange, according to a report by HK01. The arrests were made a couple of weeks after AAX halted withdrawals due to a “system upgrade glitch” and deleted all social media accounts.

Hong Kong Makes First Arrests in its AAX Investigation

The Hong Kong police arrested two individuals in connection with the AAX crypto exchange on suspicion of defrauding and misleading investors, according to a local news outlet. The Hong Kong Commercial Crime Bureau (CCB) is set to hold a press conference today and provide more details about the investigation.

The move comes just weeks after AAX deleted all of its social media accounts after halting customer withdrawals, citing a system upgrade flaw. AAX Singapore CEO Wenn Shenghe Chioh also removed all mentions of AAX from his LinkedIn profile, while the exchange’s vice president Ben Caselin stepped down from his role, claiming the trust in the exchange is “broken.”

“People, including my own family ask me for help, but there is nothing I can do. Everyone is waiting on actions. I still believe things will be handled without evil intentions, but the damage is done,” he added.

Earlier this month, Caselin said AAX also lost most of its employees after a wave of layoffs and resignations, adding the Hong Kong crypto exchange is unlikely to restart operations after freezing withdrawals last month. He said the communication from the exchange’s upper management turned “opaque and messy.”

FTX Exposure Likely the Reason Behind the AAX Collapse

AAX stopped withdrawals on Nov. 14, saying it intended to fix a glitch in its system. However, many customers suspected this was not the case and that the actual reason behind the halt was AAX’s exposure to the collapsed FTX exchange.

AAX initially denied those claims, saying the halt had no connection with the FTX crash and that it had no financial exposure to the beleaguered crypto exchange. However, the AAX team then said it needed additional funding because its investors had decided to withdraw their funds due to the FTX fiasco, citing capital deficit risks.

AAX was one of the many victims of the FTX collapse, one of the most adverse events in the history of the industry. Crypto lender BlockFi also filed for bankruptcy at the end of November due to its “significant exposure to FTX and associated corporate entities.”

The post Two Arrested by Hong Kong Police in Connection with AAX Exchange Fraud: Report appeared first on Tokenist.

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