Lawmaker Johnny Ng has called on the government to work with their global counterparts to freeze illicit funds linked to the "Fun Coffee" investment scam, with over 1,000 victims now reporting losses exceeding HK$100 million.

Ng, who is assisting dozens of victims, said authorities should also look to plug regulatory loopholes relating to over-the-counter cryptocurrency exchanges, saying fraudsters were almost operating with impunity.

The suspected Ponzi scheme collapsed last month after its mobile app went offline, cutting off all means of contact with investors who deposited money.

The scale of the operation became clearer this week, with police confirming on Tuesday that eight suspects had been arrested -- six in Hong Kong and two in Macau.

Victims had been lured by claims of staggering annual returns -- up to 222 percent -- through bogus investments in coffee technology and artificial intelligence.

Back in July, the Securities and Futures Commission had flagged Fun Coffee GCM Projects as a suspicious investment product.

Meeting with press with Ng on Wednesday, one participant recalled how the scheme initially disguised itself as a legitimate coffee business.

Fraudsters even organised large-scale social and sporting events across Hong Kong — including banquets and marathons — to cultivate a wholesome, credible image and attract public participation.

After earning their trust, victims were then urged to deposit funds to a cryptocurrency platform in exchange for exceptionally high returns.

Another person described the operation's multi-level marketing structure. Investors were persuaded to become "agents" by recruiting new members and earning commission, fuelling its rapid expansion.

Ng said his office was now conducting digital asset tracing, with the hope of providing actionable intelligence to law enforcement.

He also proposed that the government refine existing mechanisms to allow regulators or law enforcement agencies to freeze assets immediately upon detecting highly suspicious activities.

This, he said, would significantly improve victims' chances of recouping their funds.

"We will actually do a new law by the end of this year, regarding the over-the-counter exchange about the advisory of cryptocurrency investments, and also the custodians," he said.

"It's not a loophole, but I think we need to do something in order to make sure all the people in Hong Kong running a business using cryptocurrency can be regulated."

He noted many Fun Coffee victims had used physical crypto exchange terminals to move money in and out of the platform.



Edited by Raymond Yeung