Justin Sun’s US fraud charges could hamper Huobi’s license application in Hong Kong
Lawyers believe regulators will be hard pressed to approve Huobi's VASP license due to allegations of misconduct.
Justin Sun does not believe the U.S. fraud charges levied against him will impact Huobi Global’s license application in Hong Kong, Nikkei Asia reported on March 27.
However, lawyers believe otherwise and told the newspaper that the Hong Kong Securities and Futures Commission (SFC) will be hesitant to approve a license under current circumstances.
According to the report, allegations of past misconduct will result in “extreme scrutiny” which will hamper progress as regulators turn over every stone multiple times before reaching a conclusion. Lawyers believe that, at the very least, the process will be delayed significantly.
The U.S. SEC unveiled fraud and unregistered securities charges against Sun on March 22.
The fraud charges accuse Sun and his wholly-owned companies, including the Tron Foundation, of manipulating the trading activity of the Tron and BitTorrent cryptocurrencies to create the appearance of active trading.
Additionally, the SEC considers the TRON and BitTorrent cryptocurrencies to be securities that were issued without registration.
SEC chair Gary Gensler said in the statement:
“This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure.”
Multiple celebrities were also implicated in the charges against Sun for promoting the two cryptocurrencies without disclosing that they were paid to do it. Most have settled out of court without admitting guilt.
Sun told Nikkei Asia that the charges hold “no merit” and will not impact Huobi’s operations.
Hong Kong becoming a crypto-hub
Hong Kong recently pivoted on crypto and is adopting a more favorable stance toward the industry.
The city-state will legalize retail trading of cryptocurrencies on June 1 and has created a regulatory framework for the industry, which includes establishing a licensing regime for Virtual Assets Service Providers (VASPs).
As of March 20, more than 80 firms have expressed an interest in applying for the VASP license, while more than 20 firms have announced plans to establish a presence in Hong Kong, including Sun’s Huobi exchange.
Sun announced he would move Huobi Global’s headquarters to Hong Kong and advised the industry against being too “U.S.-centric.” In the weeks since, he has been confident that Huobi will secure its VASP license.
However, recent events may throw a wrench in his plans to set up shop in Hong Kong.