MAS, CAD launch investigation into CoAssets Group for possible offences under Penal Code, SFA

THE Monetary Authority of Singapore (MAS) and the Commercial Affairs Department have launched a joint investigation into various companies under the beleaguered CoAssets Group for possible offences under the Penal Code and the Securities and Futures Act (SFA).

This comes on the back of complaints and feedback from investors regarding suspected misconduct by CoAssets. Within the CoAssets Group, only the crowdfunding platform CA Funding is regulated by MAS as a capital markets services licensee.

Last December, CA Funding had informed MAS that it had failed to comply with the minimum base capital requirement under the SFA and intended to cease operations. All customers' monies held by CA Funding have since been returned to investors, under MAS's directive.

MAS said that it is "closely monitoring" CA Funding's implementation of its cessation plan to ensure that investors are treated fairly.

In March 2020, MAS had issued directions to CA Funding to prohibit the company from listing new issuances, onboarding new investors and accepting subscription of securities. These directions were issued after MAS's inspection uncovered lapses in the company's credit assessment process, inadequate disclosure of information to investors, and failure to address conflicts of interests arising from dealings that the CoAssets Group had with entities related to issuers that CA Funding had listed on its platform.

These developments come as hundreds of retail investors - mainly promissory noteholders of CoAssets' various subsidiaries - were shaken in December last year after it emerged that US$30 million of receivables could not be recovered.

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The debt recovery firm Sunfits, which the receivables were sold to, wrote in a note to investors that it could not collect the debt as there is no "visibility" on any of the assets, which signalled that investors were likely to see their investments down the drain.

Former chief operating officer of CoAssets Lawrence Lim - who has become one of the most outspoken opponents of CoAssets - alleged that crowdfunding projects that were put up on the platform are fronted by special-purpose vehicles set up by related parties based in Hong Kong that CoAssets have lent money to. The risks associated with such projects and how beneficiaries were commercially related to CoAssets were not revealed to investors, he added.

He left CoAssets in March 2019, stating "irreconcilable differences" in business direction and management with company founders, namely Getty Goh and Seh Huan Kiat.

While investments turning sour is par for the course, investors have alleged they were misled that the financial products they were sold were backed by collateral and personal guarantees.

Many CoAssets investors had agreed to extend their payment deadlines for promissory notes set to mature as then-chief executive Mr Goh had told them that they were contractually guaranteed by DWG and Denka Wee. However, these agreements were later voided due to authenticity disputes, and Mr Wee told The Business Times earlier that he "does not recall signing the document".

Investors have since grouped together to explore legal options to claw back investments.

At the start of the year, MAS-licensed CA Funding had posted on its website that it is in the process of winding up. It has since revised its message on the website to say that it is "still operating and will continue to address all queries from customers, and service customers on their outstanding investments". It added that it is in the process of working out a business cessation plan.

This comes as crowdfunding operators are required to have a plan in place to manage any cessation of business before they can wind up, which include handling investors' monies and loan agreements, repayment actions, as well as procedures for communication with investors.