What compliance insights does the criminal case involving Hong Kong financial influencers provide for Crypto Assets KOLs?

Original Author: Liu Honglin

Event Summary

On November 7, 2025, the Eastern Magistrates' Court in Hong Kong ruled that financial influencer Zhou Baixian (formerly known as Zhou Jianxi) was guilty of providing investment advice in a paid Telegram group without a license. He was sentenced to six weeks in prison and ordered to bear the investigation costs of the Securities and Futures Commission. This case marks the first instance in Hong Kong of criminal liability being pursued against unlicensed financial influencers, signaling the end of the “wild growth” era of social media investment consulting.

The judgment in this case is based on the Hong Kong Securities and Futures Ordinance. Zhou Baixian's behavior “providing advice on securities” falls under the regulated activities of Category 4, and he must obtain a license from the Securities and Futures Commission in advance. There are three key points for determining the behavior:

• Profitability: Aimed at making a profit, the charging model (such as subscription fees) constitutes a commercial activity directly;
• Sustainability: Regularly publish analyses and respond to specific issues;
• Relevance: Provide clear recommendations for specific securities (such as NASDAQ stocks), going beyond “general opinion sharing.”

Zhou Baixian operates the Telegram subscription group “Futu Real. Financial Self Private Group” under the name of “Futu Major Shareholder”. Without obtaining a license from the Securities and Futures Commission, he provided specific securities commentary, target prices, and Q&A services to Hong Kong subscribers, illegally profiting 43,600 HKD by charging a monthly fee (200 USD or 1,560 HKD), which meets the criteria for “providing opinions on securities.”

The case also reflects Hong Kong's two compliance requirements for unlicensed financial influencers: on one hand, the platform is not an excuse; regardless of whether through Telegram, Discord, or emerging social platforms, as long as it constitutes investment advice, a license is required; on the other hand, the audience determines jurisdiction; even if the servers are located overseas, as long as the target audience is Hong Kong investors, it is subject to regulation.

In previous cases similar to the Hong Kong financial internet celebrity example, licensed representative Huang Mouzhong had his license suspended for 16 months due to operating a paid group as an individual. However, this case marks the first use of criminal penalties, highlighting the regulatory upgrade in Hong Kong regarding unlicensed financial internet celebrities making investment recommendations.

The ruling in this case is consistent with the global trend of strengthening regulation on “financial influencers.” As financial markets develop, regulators in various countries are increasingly focusing on investor protection and maintaining market integrity, and becoming more cautious of the risks posed by misleading content on social media that can mislead investors.

The Financial Conduct Authority (FCA) in the UK has established a clear regulatory framework for financial promotion activities, particularly those targeting cryptocurrencies and financial influencers. It requires that all investment promotions conducted on social media must be approved in advance, prohibits financial institutions from promoting “improper” investment behaviors, and emphasizes that financial promotional activities must ensure “fairness, clarity, and non-deceptiveness.” Violations will face criminal penalties and fines.

The U.S. Securities and Exchange Commission (SEC) is cracking down on unauthorized financial promotion activities, imposing fines on companies and individuals who violate rules or engage in other types of market manipulation, with fines reaching up to millions of dollars. The SEC previously imposed a fine of $1.75 million on an investment management company for failing to disclose the promotional role of a social media influencer associated with its exchange-traded fund (ETF) launch, as well as the fee structure tied to the influencer's impact on the fund's growth.

The regulatory authorities such as the Mainland Cyberspace Administration are also continuously rectifying the chaos in financial information such as illegal stock recommendations on the internet, and have taken legal action against a number of accounts and websites that disseminate false information about the capital market, engage in illegal stock recommendations, and speculate on virtual currency trading.

It can be seen that financial influencers and their promotional activities are being comprehensively included in a stricter and more international regulatory perspective, and relevant participants need to pay more attention to compliance risks.

Implications of this case for cryptocurrency KOLs

Although this case only directly involves traditional securities investment advice, the regulatory signals it conveys will also impact the field of crypto assets.

On one hand, the judgment concept in this case is rooted in the principle of investor protection, which is equally important in the virtual asset market with more complex risk characteristics.

In recent years, the issue of investor protection in the field of crypto assets has gradually emerged. A 2025 VISTA study shows that 58% of Generation Z (born 1995-2009) and Millennials (adults in the 21st century) prioritize self-directed investment, but many lack the expertise to assess the risks of unregulated investment opinions and are easily attracted by aggressive and misleading promotional activities. This has led to a surge in speculative trading in the crypto market, and some investors have even lost their life savings by using contracts for difference or investing in volatile assets such as unregistered crypto tokens. In multiple incidents, including the Hong Kong JPEX case, investors have reported suffering losses due to the influence of online promotions and social media investment opinions.

The JPEX virtual asset platform fraud case is the largest cryptocurrency fraud case in Hong Kong in recent years, involving an amount exceeding HKD 1.6 billion and over 2,700 victims. JPEX personnel attracted a large number of investors by advertising, social media, over-the-counter exchanges, and endorsements from influencers/KOLs, claiming “legal compliance, celebrity endorsement, low risk, and high returns”. Ultimately, customer funds were transferred into cryptocurrency wallets for money laundering and harvesting. In this case, the police also cited for the first time the provisions of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, effective in 2023, regarding “fraudulently or recklessly inducing others to invest in virtual assets” to prosecute multiple influencers involved in the case. This case reflects, on the one hand, how easily investors can be influenced by online promotions and social media opinion leaders, leading to blind investments; on the other hand, it also reflects the government's attention to regulating the negative publicity surrounding virtual assets.

On the other hand, Hong Kong is steadily advancing the improvement of its regulatory framework for virtual assets, emphasizing compliance for tokenized assets and continuously establishing a licensing system to regulate services related to virtual assets. In the future, Hong Kong may refer to the regulatory standards for stock analysts in the traditional financial industry and require virtual asset KOLs to adhere to higher professional and disclosure requirements when making investment recommendations, in order to prevent disorderly promotion and misleading information in the virtual asset market, maintain market order, and protect the interests of investors.

Given the current regulatory trends, financial influencers and content creators in the virtual asset space need to pay extra attention to potential KOL legal compliance risks. With the Hong Kong Securities and Futures Commission planning to require brokers to conduct due diligence on KOL collaborating influencers and continuously monitor their content, the operational costs and compliance thresholds for the entire KOL industry may significantly increase.

In this context, market participants may face two main choices:

Firstly, participants can adjust their expression to cautiously avoid the possibility of the discussed content being deemed as investment advice. For example, participants can shift towards educational content such as blockchain technology analysis, macro trend interpretation, and risk management, avoiding references to specific token buy/sell points and target prices. This allows for a more prudent grasp of the boundaries of content creation and a clear disclosure of risks and interests, thereby avoiding the regulatory red line of “investment advice.”

Secondly, participants can actively seek compliance pathways and establish partnerships with licensed institutions. For example, participants can incorporate content creation into a compliance framework by collaborating with licensed virtual asset trading platforms such as HashKey, OSL, or traditional licensed institutions.

These industry adjustments may bring about some structural changes while enhancing the overall compliance level. For instance, the channels through which investors obtain investment advice may be restricted, and the costs of professional consulting services may rise accordingly. Some market participants may be forced to scale down their business or shift to regions with relatively lenient regulatory environments due to the inability to bear compliance costs. However, in the long run, establishing a clear regulatory framework will help the standardized development of the virtual asset market. On one hand, it can enhance market transparency in the crypto asset field, greatly reducing the likelihood of retail investors falling victim to “pump and dump” schemes, and boosting the participation confidence of compliant institutional investors; on the other hand, it may promote the transformation of industry content creation towards professionalization and value addition, thereby achieving a more balanced development path between protecting investor interests and promoting industry growth.

Conclusion

The Zhou Baixian case is like a mirror, reflecting Hong Kong's efforts to protect financial security and ordinary investors. For KOLs in the crypto space, this is also a clear warning signal—Web3 KOLs also need to fulfill compliance obligations.

“Decentralization” does not mean “no regulation”; technological innovation must be balanced with investor protection. As the regulatory framework for virtual assets in Hong Kong continues to improve, only those participants who can grasp the pulse of the market while adhering to compliance standards will stand out in the new era.

Whether Hong Kong can find a balance between promoting Web3 innovation and maintaining market integrity in the future will depend on the joint efforts of regulatory wisdom and industry self-discipline, and this ruling is undoubtedly an important milestone in this process.