Crypto investor Jenny first learned about digital assets at a Hong Kong store that promoted cryptocurrency exchange JPEX in March — but by September she was among more than 2,000 "inexperienced" victims police said the platform had defrauded.

"Many of my classmates and friends went all in with our investments," Jenny — not her real name — who lost "six figures" in Hong Kong dollars, told reporters.

"We never thought it would be a scam."

The scandal surrounding JPEX has so far seen 11 arrests of company staff and affiliated influencers this week for "conspiracy to defraud", with victims' losses exceeding $175 million.

JPEX's downfall is casting a shadow over Hong Kong's embrace of digital assets, with experts saying it has revealed regulatory gaps just three months after the rollout of rules requiring crypto exchanges to get licensed and meet investor protection standards.

The Securities and Futures Commission last week issued a warning against the platform, saying it falsely advertised itself as "licensed" and showed suspicious features like very high returns.

In response, JPEX halted its return-generating products and imposed sky-high fees on withdrawals.

Police on Monday conducted a high-profile raid of 20 premises — including crypto businesses and private homes — seizing cash, computers, and luxury handbags.

Two telecommunications service providers confirmed Thursday they complied with police to block access to JPEX's website.

Investigators are probing whether JPEX conspired with influencers and shops to play up the platform's legal status and the value of JPEX-issued virtual coins.

"Victims often had a 'fear of missing out' mentality and impulsively believed in advertisements… (But) there is no such thing as a free lunch," said senior superintendent Kung Hing-fun, describing the scale of the case as "shocking".

JPEX — headquartered in Dubai according to its website — has blasted the regulatory action as "unfair" and "biased".