Fincy's overlapping ranks raise concerns about structure

Singapore

OVERLAPPING relationships among Singapore-based fintech Fincy's ranks have raised concerns among observers about how robust its checks and balances are, following allegations surrounding its connections to Myanmar's controversial Yatai City project.

Fincy's current structure points to a lack of segregation of key roles, observers point out. If the checks and balances within a company are not stringent enough, suppliers, clients and other partners might be at risk of being short-changed, and the interest of stakeholders could be jeopardised, they said.

Fincy is now under scrutiny after it pulled out of the Myanmar border city, amid allegations that the payments network it operates was being used to prevent law enforcement from tracking financial transactions in the city. Yatai City, also called Shwe Kokko, was accused by the United States Institute of Peace (a US Congress-funded body) of being developed as a front for illegal, large-scale gambling activities.

While the startup has refuted all claims of nefarious dealings, the recent event has prompted a closer look at the company's structure and strength of corporate governance.

Fincy's group chief executive officer Douglas Gan is also the chief executive, director and co-founder of GBCI Ventures, which in June injected over US$11 million into the fintech startup.

Mr Gan, 38, and Lim Ming Wang, 34, who is GBCI Ventures' chief business officer and Fincy Cambodia's CEO, hold two out of four seats on Fincy's board. Fincy's other two directors - Isaac Cheong, 29, and Su Bingchao, 36 - had previously held seats on the board of BCB Innovation, the company behind the Building Cities Beyond (BCB) blockchain protocol that Fincy is built upon.

GBCI Ventures in 2019 had also raised US$100 million for the BCB blockchain initiative on the stated aim of supporting smart-city solutions.

Additionally, Mr Gan is the sole shareholder of GB Capital Investments Pte Ltd, a S$1 company, which is the sole shareholder of GBCI Ventures. GBCI Ventures is also the sole shareholder of Fincy.

Corporate governance advocate and National University of Singapore (NUS) Business School associate professor Mak Yuen Teen told The Business Times: "Having a structure like this could be an attempt in ring-fencing risk, which might create a moral hazard. In the worst-case scenario, GBCI Ventures would only stand to lose the amount it invested in Fincy, while the fintech company itself can take on huge risk." But if Fincy makes a lot of money, the profits can then be paid to GBCI Ventures, and then to GB Capital Investments, as dividends, said Prof Mak.

But, there's no inherent conflict in having an investor found a startup if they have the relevant expertise and time to manage both endeavours, said joint managing partner of TSMP Law, Stefanie Yuen Thio. However, it's not something you typically see because investors and startup founders have different skill sets, she added.

Fincy told BT in a statement: "Our CEOs come from entrepreneurial backgrounds and enjoy working across different roles to leverage the wide range of skill sets learned along their journeys to date.

"As Fincy is a venture-built company from GBCI Ventures, it makes sense for their C-suite to have an overview of both companies."

Venture builders, like GBCI Ventures, build startups in-house. They often retain a majority stake in their ventures, and become less hands-on as the startup matures. Venture builders also tend to dilute their stakes as the startup grows, through new management they bring in or with new investors.

Currently, Fincy is solely owned by GBCI Ventures. Venture investment database VentureCap Insights showed that two other investors, Lee Chang Jin - a general partner and co-founder of GBCI Ventures - and Susanto, have made full exits from the startup.

Other startups GBCI Ventures has invested in include Chinese blockchain media platform Cailu. The company told BT in June that it has also invested in "other fintech businesses... as well as some IoT (Internet of Things) companies".

The Fincy app enables users to perform currency exchange and pay merchants in various countries. Through the BCB blockchain protocol, Fincy was said to be the exclusive provider of financial infrastructure to Yatai City's 40,000 residents, who use the app to make purchases, perform transactions, receive salaries and manage their expenses digitally.

BT understands that the app is currently not licensed in Singapore.

But, the money app is fully licensed in Phnom Penh, Cambodia, where it is accepted at more than 700 merchants and used by over 40 companies for payroll, Fincy said.