Global cryptoexchange sued by UK regulator for breaching financial promotions rules
The Financial Conduct Authority (FCA) has taken the significant step of issuing High Court proceedings against the global cryptoexchange HTX for alleged breaches of the financial promotions regime under the Financial Services and Markets Act 2000 (FSMA).[1] The case represents the first enforcement action of its kind since the extension of the UK’s financial promotions regime to ‘qualifying cryptoassets’ in October 2023 and serves as a reminder to overseas exchanges about the long reach of UK regulatory requirements.
Background
HTX provides cryptoasset exchange services. It was previously known as Huobi. According to the FCA’s pleadings, HTX was the sixth-most accessed digital assets provider in the UK in 2023, with around 4.6 million visits from UK users that year and a further 13,000 visits in 2024.
The FCA’s claim is brought against Huobi Global S.A. (a Panamanian company) and several categories of “Persons Unknown”, reflecting the opacity of the exchange’s corporate structure to the regulator. The “Persons Unknown” defendants include the owners and current controllers of HTX, the persons defined as ‘HTX Operators’ in HTX’s user agreement, the persons currently in control of promoting HTX on various social media platforms, and future successors to those roles.
The financial promotions regime
Section 21 of FSMA prohibits any person from communicating, in the course of business, an invitation or inducement to engage in investment activity, unless they are authorised by the FCA, the content of the communication is approved by an FCA-authorised person, or they fall within an exemption.
Since 8 October 2023, the restriction has applied to financial promotions involving ‘qualifying cryptoassets’.[2] Where the communication originates outside the UK, the prohibition applies where the communication is capable of having an effect in the UK – a test that does not require active targeting of UK consumers.
There is an exemption for communications directed only at persons outside the UK. However, this exemption is not satisfied simply by stating that UK users are not targeted and that UK users must not act on the financial promotions. In addition, for a communication to benefit from this exemption, generally proper systems and procedures must be in place to prevent UK recipients from engaging in the relevant investment activity and the communication must not be referred to in, or accessible from, other communications directed at UK persons.
The FCA’s claim
The FCA alleges the defendants have, through HTX and social media platforms, communicated invitations and inducements to engage in investment activity without authorisation, which have not been approved by an FCA-authorised person, and without the benefit of any exemption.
The FCA’s Particulars of Claim include 10 pages of examples of promotional communications alleged to have been made by the defendants, including:
- a communication on HTX’s home page to “Sign up, trade, and earn up to 1,200 USDT” above a box called “Register Now”
- an X post stating that “[USD emoji] Grasp volatile market trends, grid trading helps you achieve sustained and stable results” stating that you can “Participate in HTX spot grid trading and enjoy 5000 USDT prize pool” and that “New users can win double rewards” followed by a link to HTX
- an Instagram video with a caption entitled “Trade with #HTX, we make trading crypto easy! Trade 300+ cryptos along with #PONKE 24/7”
The FCA states that it engaged with HTX before commencing proceedings. Letters were sent in July, August and September 2023 warning of the forthcoming regulations and seeking information on compliance measures. The FCA publishes a warning list of unauthorised firms that the FCA believes are operating in the UK without the relevant permission, and HTX was placed on this warning list on 8 October 2023. Further correspondence was sent in October 2024, to which HTX responded only that it had “stopped targeting any UK consumers”. HTX did not respond to a letter before claim sent in August 2025.
The FCA considers that HTX’s statement that it stopped targeting UK consumers did not mean it was exempt from the financial promotions regime. It alleges that HTX failed to implement proper systems to prevent UK users from engaging in investment activity and, in support of this, relies on:
- HTX being in English
- GBP being an available currency for use on HTX
- HTX accepting UK photo ID for verification
- the 4.6 million visits to HTX from the UK in 2023 and 13,000 visits in 2024.
It also notes that an FCA employee using a UK IP address was able to complete various cryptocurrency transactions and trades after providing verification with a UK driving licence.
The FCA has been granted permission to serve the claim on the defendants out of the jurisdiction and/or by alternative means.
Sanctions
In the proceedings, the FCA seeks an injunction to restrain the defendants from communicating financial promotions in breach of section 21 of FSMA. It also seeks a declaration that the defendants (save for future successors) have contravened section 21 of FSMA by communicating financial promotions.
Breaching section 21 of FSMA is a serious criminal offence that is subject to up to two years’ imprisonment and/or a fine. Where a company has breached section 21, its officers will be liable individually where the offence was committed with their consent or connivance or is attributable to their neglect. It remains to be seen whether the FCA will seek to bring criminal proceedings in relation to the alleged breaches.
Separately, where a customer enters into an agreement as a result of a breach of the financial promotions regime, the contract is unenforceable against the customer and the customer is entitled to receive any money paid under the contract and compensation for any losses sustained.[3]
Key takeaways for cryptoexchanges
The case sends a clear message to overseas cryptoexchanges that the UK’s financial promotions regime applies to communications capable of having effect in the UK, regardless of where the communicator is based or whether UK consumers are specifically targeted. It also acts as a warning that the FCA is prepared to enforce the regime, using claims against “Persons Unknown” and alternative service methods to overcome difficulties with locating communicators.
Unauthorised overseas cryptoexchanges (and other cryptoasset firms) that wish to avoid exposure to UK enforcement action must either ensure their promotional communications are approved by an authorised person or fall within an exemption, with the exemption outlined above requiring robust measures to ensure they do not have an effect in the UK (e.g. geo-blocking, disclaimers). Merely stating that UK users are not targeted, without taking effective steps to exclude them, will not suffice.
The FCA’s action also takes place at a key time for the UK’s regulation of cryptoassets. The FCA recently announced that it will accept applications from September 2026 relating to the new cryptoasset regulatory regime which enters into force in October 2027. Under the new regime, overseas firms that trade with consumers in the UK are likely to need to be authorised in the UK, in addition to complying with the financial promotion regime. Further information can be found in the CMS Digital Assets Regulatory Hub.[4]
[1] HTX (formerly Huobi): legal proceedings information | FCA
[2] Any cryptoasset that is fungible and transferrable, subject to certain exemptions
[3] Section 30 of FSMA
