Embattled crypto exchange JPEX has pushed ahead with a plan that will purportedly transition the platform into a decentralized autonomous organization (DAO) and convert user assets to dividend shares with an incentive to lock them up for two years.
An Oct. 4 announcement from JPEX said voting for its “DAO Shareholder Dividend Scheme” was completed on Sept. 28, claiming that 68% of users voted in favor for the scheme.
The scheme involves letting users convert their currently frozen assets to DAO Stakeholder dividends at a 1:1 ratio, with JPEX offering a repurchase option at 30% of the conversion price after a year and a 100% repurchase after two years.
In an earlier announcement, JPEX said users who agreed to the scheme will receive dividends from JPEX through new token listing and trading fees and would receive a distribution of JPEX Coin (JPC) — the exchange’s native token — in proportion to shareholder dividends.
The scheme appears to be an incentive for users to keep their funds on the embattled exchange, which has been experiencing liquidity issues.
However, a JPEX user — who was given anonymity — told the South China Morning Post in an Oct. 4 report claims her assets had been converted seemingly without her agreement or prior knowledge.
She claims that she and other users found they could no longer withdraw their assets following JPEX’s announcement to proceed with the plan.
The Hong Kong police and the city’s Securities and Futures Commission have formed a joint task force to crack down on illegal crypto exchange activities. Meanwhile, the JPEX scandal continues to unfold. https://t.co/lOBRNlLs7m
— Cointelegraph (@Cointelegraph) October 5, 2023
“All of my [Tether] USDT and other cryptocurrencies are gone,” the person said. She claimed her assets were converted to JPC — a low liquidity token with few use cases.
“Some other users holding the tokens and other assets have also found them transferred,” the user said. “Given the unknown price and the impossibility of withdrawal, our assets have now become just waste paper.”
It’s not known if the people quoted in the report voted in favor of the plan but some JPEX users previously told the SCMP they’d been forced to accept the plan as there was no option to vote against it on its app.
JPEX did not immediately respond to Cointelegraph’s request for comment.
JPEX’s dividend plan comes amid Hong Kong police arresting multiple people in connection with the exchange as it’s accused of operating an unauthorized crypto platform by the region’s securities watchdog.
Hong Kong police say the Dubai-based exchange defrauded at least 2,300 people of $178 million (1.4 billion Hong Kong dollars).
Earlier on Oct. 4, the region’s police and securities regulator launched a crypto-focused task force aiming to combat illicit activities by crypto exchanges.