A former senior manager at Huobi, one of the world’s largest crypto exchanges, is being prosecuted in Hong Kong after accusations that he made $5mn by secretly trading against a company account he controlled.
The case, which has not been previously reported, concerns trades allegedly made in February and March 2020 by a then-senior manager in Huobi’s institutional clients department, Chen Boliang.
The claims against Chen come as the cryptocurrency industry not only endures a spiralling credit crunch but, after years in the wild west of finance, is increasingly facing the consequences of employee conduct and compliance issues that have ensnared more traditional banks and fund managers.
Huobi has risen from its launch in China in 2013 to become among the top five crypto exchanges in the world by daily volume of crypto traded. The exchange is now registered in the Seychelles following a crackdown on crypto exchanges in China last year.
Chen’s case is set for a preliminary inquiry before a magistrate next week. Such inquiries in Hong Kong law are requested by a defendant and are conducted to decide if there is enough evidence for the case to go to trial.
Chen, 34, was arrested in May 2020 and has been charged with accessing Huobi’s computer systems with criminal or dishonest intent and dealing with the proceeds of a crime in the form of $5mn worth of USDT, a type of stablecoin, according to Hong Kong court records.
He allegedly set up a Huobi retail account in his father’s name, and gave it a $20mn credit line from the exchange, according to a civil lawsuit filed by Huobi. He then traded against a Huobi corporate account he also controlled, a scheme that netted him about $5mn of profits, the suit alleged.
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Chen is out on a $25,000 bail, according to a charge sheet released in Hong Kong this month. He faces six counts on accessing Huobi’s computer systems and one count related to proceeds of crime. An attorney for Chen, Lareina Chan, did not respond to a request for comment.
It is unclear how Huobi detected the trades, though it reported Chen to the police in April that year.
Huobi Global said: “Mr Boliang Chen’s employment with Huobi Global was terminated in May 2020. We have no further comments pertaining to the charges against Mr Boliang Chen and believe in the administration of justice by the HK Special Administrative Region.”
Law enforcement agencies globally have sought to police crypto markets more aggressively in recent years, making clear that they view criminal laws that apply to traditional financial groups just as applicable to cryptocurrencies.
Earlier this month, US prosecutors brought an insider trading case against a former employee of OpenSea, the marketplace for non-fungible tokens (NFTs). Such assets have become prominent from their use in digital artworks.
Additional reporting by Ryan McMorrow in Beijing
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