"Decentralization" does not mean "unregulated"; technological innovation must be balanced with investor protection.
Event Summary
On November 7, 2025, the Eastern District Court of 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, sentencing him to six weeks in prison and requiring him to bear the costs of the Securities and Futures Commission (SFC) investigation. This case marks the first instance in Hong Kong where a non-licensed financial influencer has been held criminally liable, 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, which classifies Zhou Baixian's actions of "providing opinions on securities" as a regulated activity under Category 4, requiring prior licensing from the SFC. The determination of his actions is based on three key points:
Profitability: The intent to profit, with a charging model (such as subscription fees) constituting a commercial activity;
Continuity: Regularly publishing analyses and responding to specific inquiries;
Targeting: Providing clear recommendations on specific securities (such as NASDAQ stocks), going beyond "general opinion sharing."
Zhou Baixian operated a Telegram subscription group called "Futu True. Financial Private Group" under the name "Futu major shareholder," providing specific securities commentary, target prices, and Q&A services to Hong Kong subscribers without obtaining SFC licensing. He illegally profited 43,600 HKD by charging a monthly fee (200 USD or 1,560 HKD), meeting the criteria for "providing opinions on securities."
This case also reflects Hong Kong's two-fold 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, any investment advice requires a license; on the other hand, the audience determines jurisdiction; even if the server is located overseas, as long as the target audience is Hong Kong investors, it is subject to regulation.
In previous similar cases involving financial influencers in Hong Kong, licensed representative Huang Mouzhong had his license suspended for 16 months for operating a paid group in a personal capacity. However, this case marks the first use of criminal penalties, highlighting the upgrade in Hong Kong's regulation of unlicensed financial influencers providing investment advice.
The ruling in this case aligns with the global trend of strengthening regulation of "financial influencers." As financial markets develop, regulators worldwide are increasingly focusing on investor protection and maintaining market integrity, becoming more vigilant about the risks of misleading content on social media that can mislead investors.
The UK's Financial Conduct Authority (FCA) has established a clear regulatory framework for financial promotional activities, particularly those targeting cryptocurrencies and financial influencers, requiring all investment promotions conducted on social media to be pre-approved, prohibiting financial institutions from promoting "improper" investment behaviors, and emphasizing that financial promotions must ensure "fairness, clarity, and non-misleading" content, with violations facing criminal penalties and fines.
The U.S. Securities and Exchange Commission (SEC) has been cracking down on unlicensed financial promotional activities, imposing fines on companies and individual influencers that violate rules or engage in other types of market manipulation, with fines reaching millions of dollars. The SEC once imposed a fine of $1.75 million on an investment management company for failing to disclose the promotional role of a social media influencer and the fee structure linked to the influencer's promotion of its exchange-traded fund (ETF).
Regulatory bodies in mainland China, such as the Cyberspace Administration, are also continuously addressing issues of illegal stock recommendations and other financial information chaos online, legally handling a number of accounts and websites that spread false information about the capital market, engage in illegal stock recommendations, and hype virtual currency trading.
It is evident that financial influencers and their promotional activities are being comprehensively integrated into a stricter and more international regulatory perspective, and relevant participants need to pay more attention to compliance risks.
Implications for Cryptocurrency KOLs
Although this case directly involves traditional securities investment advice, the regulatory signals it conveys will also impact the field of crypto assets.
On one hand, the judgment's rationale is rooted in the principle of investor protection, which is equally important in the more complex risk characteristics of the virtual asset market.
In recent years, issues of investor protection in the crypto asset field have gradually emerged. A 2025 VISTA study indicated that 58% of Generation Z (born 1995-2009) and millennials (adults in the 21st century) prioritize self-directed investing, but many lack the expertise to assess the risks of unregulated investment opinions and are easily attracted by aggressive, misleading promotional activities. This has led to a surge in speculative trading in the crypto market, with some investors losing their life savings due to trading volatile assets like contracts for difference or investing in unregistered cryptocurrencies. In several incidents, including the Hong Kong JPEX case, investors reported losses influenced by online promotions and social media investment opinions.
The Hong Kong JPEX virtual asset platform fraud case is one of the largest cryptocurrency fraud cases in Hong Kong in recent years, involving over 1.6 billion HKD and affecting more than 2,700 victims. JPEX personnel attracted a large number of investors by advertising, social media, over-the-counter exchanges, and influencer/KOL promotions, claiming "legal compliance, celebrity endorsement, low risk, and high returns," ultimately transferring customer funds into cryptocurrency wallets for money laundering. In this case, the police also cited the "fraudulently or recklessly inducing others to invest in virtual assets" clause from the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, which came into effect in 2023, to prosecute several involved influencers. This case reflects both the susceptibility of investors to online promotions and social media opinion leaders, leading to blind investments, and the government's emphasis on regulating the negative publicity surrounding virtual assets.
On the other hand, Hong Kong is steadily advancing the improvement of its virtual asset regulatory framework, emphasizing compliance for tokenized assets and continuously establishing a licensing system to regulate virtual asset-related services. In the future, Hong Kong may adopt regulatory standards similar to those for stock analysts in the traditional financial industry, requiring virtual asset KOLs to adhere to higher professional and disclosure requirements when providing investment advice, to prevent disorderly promotion and misleading information in the virtual asset market, maintain market order, and protect investor interests.
Given the current regulatory trends, financial influencers and content creators in the virtual asset field need to pay special attention to potential KOL legal compliance risks. As the Hong Kong SFC plans to require brokers to conduct due diligence on KOL 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:
First, participants can adjust their expression methods to cautiously avoid having their discussed content classified as investment advice. For example, participants can shift towards educational content such as blockchain technology analysis, macro trend interpretation, and risk management, avoiding specific mentions of token buy/sell points and target prices, and more carefully defining the boundaries of content creation while clearly disclosing risks and interests to avoid crossing the regulatory red line of "investment advice."
Second, participants can proactively seek compliance pathways by establishing partnerships with licensed institutions. For instance, participants can collaborate with licensed virtual asset trading platforms like HashKey and OSL or traditional licensed institutions to incorporate content creation into a compliance framework.
These industry adjustments may enhance overall compliance levels while also potentially leading to some structural changes. For example, the channels through which investors obtain investment advice may become limited, the costs of professional consulting services may increase accordingly, and some market participants may have to scale back their operations or shift to regions with relatively relaxed regulatory environments due to an inability to bear compliance costs. However, in the long run, establishing a clear regulatory framework will help promote the orderly development of the virtual asset market. On one hand, it can enhance market transparency in the crypto asset field, reducing the likelihood of retail investors falling victim to "pump and dump" schemes and boosting the confidence of compliant institutional investors. On the other hand, it may encourage the industry’s content creation to shift towards professionalism and value, thus achieving a more balanced development path between protecting investor interests and promoting industry growth.
Conclusion
The Zhou Baixian case serves as a mirror, reflecting Hong Kong's efforts to protect financial security and ordinary investors. For KOLs in the crypto field, this is also a clear warning signal—Web3 KOLs also need to fulfill compliance obligations.
"Decentralization" does not mean "unregulated"; technological innovation must be balanced with investor protection. As Hong Kong's virtual asset regulatory framework continues to improve, only those participants who can grasp market trends 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 will depend on the joint efforts of regulatory wisdom and industry self-discipline, and this ruling is undoubtedly an important milestone in that process.
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