Hong Kong lawmaker pushes fund tracing to tackle Fun Coffee crypto

A Hong Kong lawmaker has demanded that authorities freeze illicit crypto funds tied to the “Fun Coffee” Ponzi scheme, which has left more than 1,000 investors out of pocket for a total loss exceeding HK$100 million【1】. The move aims to improve victims’ chances of recovery and close regulatory gaps in over‑the‑counter (OTC) crypto exchanges.

Scale of the fraud

The “Fun Coffee” scheme, marketed as a coffee‑technology and AI investment, promised annual returns of up to 222 % before its mobile app vanished last month, cutting off all investor contact【1】. Police confirmed eight arrests this week, highlighting the operation’s breadth【1】. The Securities and Futures Commission had already flagged the product as suspicious in July, underscoring regulatory concerns that pre‑dated the collapse【1】.

Legislative push for fund tracing

Lawmaker Johnny Ng, who is assisting dozens of victims, called for coordinated international efforts to freeze the crypto proceeds and for Hong Kong to tighten OTC exchange oversight【1】. Ng’s office is now conducting digital‑asset tracing to supply actionable intelligence to law enforcement, and he pledged a new law by year‑end targeting OTC crypto advisory and custodial practices【1】. He argued that enabling regulators to freeze assets “immediately upon detecting highly suspicious activities” would markedly improve recovery odds【1】.

On‑chain and regulatory context

Victims reportedly moved money through physical crypto exchange terminals, a channel that complicates tracking and highlights the need for robust KYC/AML linkage to wallet addresses—a focus echoed in broader policy drafts such as the SEC’s Crypto Task Force framework, which stresses identity verification and travel‑rule enforcement for exchanges【5】. While the Fun Coffee case is localized, it reflects a global trend of sophisticated scams exploiting gaps in crypto‑exchange regulation.

What to watch

• Progress on the proposed OTC‑exchange law, slated for introduction before the end of 2026.
• Any announced international cooperation agreements for freezing crypto assets linked to the Fun Coffee scheme.
• Subsequent arrests or asset seizures that could signal the effectiveness of fund‑tracing efforts.

The push for fund tracing and tighter OTC regulation could set a precedent for how Hong Kong handles crypto‑related fraud, but its success will depend on swift legislative action and cross‑border enforcement coordination.