UK FCA Begins Legal Actions Against Justin Sun’s HTX

Key Insights

• The UK FCA has sued HTX for violating its rules on promotion of crypto services.
• The regulator claims that the Justin Sun-owned exchange has been deliberately violating the rules, noting that HTX is on the warning list.
• FCA has become more receptive to crypto entities as the UK prepares for a crypto regulatory framework in 2027.

The United Kingdom Financial Conduct Authority (FCA) has initiated legal action against crypto exchange HTX for violating its crypto promotion rules. The regulator alleged that HTX is illegally promoting crypto assets to UK consumers.

HTX is an offshore exchange with a majority stake reportedly controlled by TRON Network founder Justin Sun.

FCA Claims HTX UK Customers Are Seeing Illegal Promotions

According to FCA, HTX has been engaging in illegal promotion of crypto services to UK residents using its website and social media. This violates the FCA’s 2023 crypto marketing rules.

Under the rules, promotions by crypto firms must protect consumers and must not be misleading. While most major crypto companies have been complying, the FCA said HTX has not. It previously warned the crypto exchange and has even included the firm Huobi on its warning list.

FCA joint executive director of enforcement and market oversight, Steve Smart, noted that HTX’s compliance contradicts the general approach of crypto firms. This has made the exchange the first crypto entity to be sued under the rules.

He said:

“HTX’s conduct stands in stark contrast to the majority of firms working to comply with the FCA’s regime. This is the first time we’ve taken enforcement action against a crypto firm illegally marketing its products to UK consumers. We’ll continue to act against firms that ignore our rules.”

Interestingly, the exchange has now restricted new UK customers from creating accounts on its platform following the FCA’s initiation of proceedings. However, existing UK customers can still access the platform, a fact that FCA considers a sign of continuing breach.

The regulator has reportedly now requested that Google and Apple remove HTX apps in the UK. It has also requested that social media companies restrict access to the exchange’s accounts for UK consumers.

Illicit funds flow. Source: BlocSec

The FCA crackdown only adds to the controversy surrounding HTX and its founder, Justin Sun. While HTX is the sixth biggest exchange by market share, it has also been accused of being a major hub for illicit funds.

According to blockchain security firm BlocSec, it observed funds from the illicit marketplace TG Guarantee ecosystem flowing into centralized exchanges. Crypto exchanges such as OKX, Binance, and HTX were identified.

FCA Approves Blockchain.com As it Prepares for Crypto Regulation in 2027

Meanwhile, the crackdown on HTX does not reflect FCA’s current approach to crypto entities. The regulator has grown more permissive towards crypto companies in recent years as global sentiment towards regulation has shifted.

It recently approved  Blockchain.com, allowing the exchange to finally register and serve customers in its home country. Blockchain.com started in the UK in 2011 and has its headquarters in London, but pivoted to Lithuania in 2022.

However, it did not get approval when the FCA first started registering crypto entities in 2022. Since then, the exchange has secured a MiCA license in Malta.

Interestingly, the UK is set to have a full crypto regulatory regime in 2027. Crypto companies would have to apply for full authorization under the new framework.

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