MAS will take action if CoAssets unit has breached regulations

The Monetary Authority of Singapore (MAS) will review and take necessary action if CoAssets’ licensed subsidiary – now known as CA Funding – has breached regulations.

As a matter of policy, MAS does not disclose its dealings with regulated financial institutions, a spokesman said.

MAS added that it is aware that police reports have been lodged against CoAssets. It also clarified that it does not regulate the group, but only the specific entity that is licensed with MAS.

Hundreds of CoAssets’ retail investors were left reeling early last month when it came to light that the Singapore-based alternative lending platform had transferred US$30 million (S$40 million) of its borrowings to a little-known debt recovery firm, Sunfits, according to a Tech in Asia report.

Sunfits wrote in a note to investors that it could not collect on the debt as there is no “visibility” on any of the assets. In a separate e-mail sent on Monday, it was revealed that CA Funding is “currently non-operational and insolvent”, with loan recovery “extremely challenging”.

Aggrieved investors have since filed police reports against CoAssets co-founders Getty Goh, who was the former group chief executive officer, and Seh Huan Kiat, and have grouped together on social media channels such as Telegram to pursue legal action.

When asked by The Business Times if the Commercial Affairs Department was handling the matter, the police confirmed only that reports had been lodged.

In a Facebook statement that was later taken down, Mr Goh denied blame for the fiasco. He had stepped down as chairman and group CEO earlier last year, but remains CEO of the MAS-licensed CA Funding.

The chairmanship and group CEO posts were taken over by Mr Denka Wee, director of real estate brokerage firm DWG. Mr Wee resigned as CoAssets chairman last month.

The earlier plan was for DWG to absorb CoAssets and help investors with an exit, wrote Mr Goh. However, the deal failed to take off, with differing accounts of what transpired.

CoAssets first started out as a crowdfunding site for real estate in 2013, but later embarked on a different business model where it set up subsidiaries and issued loans known as promissory notes to investors.

Promissory notes are debt instruments that allow companies to obtain financing from sources other than a bank. As these promissory notes are higher risk, they are usually offered only to corporate or sophisticated investors.

Amid talk of a potential merger with DWG, Mr Goh had convinced investors to stay on board and extend the payment deadlines for many of the promissory notes that were set to mature last year, claiming that the notes were contractually guaranteed by DWG and Mr Wee. This came as Covid-19 became the final nail in the coffin, hitting the alternative lending industry hard and drying up funding.

However, investors who were counting on the guarantee found their hopes dashed when DWG voided the agreement, citing “suspicious activity” after a review of documents.

In an e-mail statement to Tech in Asia, DWG claimed it had discovered “irregularities, misinformation and suspicious transactions” when it looked into CoAssets.

Former CoAssets chief operating officer Lawrence Lim has gone public to urge affected investors to file police reports.

In an interview with Tech in Asia, he raised issues with the promissory notes such as the lack of transparency, with funds mostly diverted to one company that invested in projects such as tech start-ups and film productions. They were also not backed by collateral.

Mr Lim also alleged that CoAssets did not inform investors that the companies in its portfolio had trouble repaying the loans and continued to raise funds.

Several affected investors expressed their frustration on social media, alleging that they were told the promissory notes were backed with collateral and personal guarantees.

Early last year, CoAssets told investors it had 17kg of emeralds worth US$6 million that could be used as collateral. But it was revealed that the emeralds were worth only about US$15,000 in an independent valuation by Sunfits.

Both Sunfits and DWG are also considering legal action, according to Tech in Asia.

In CoAssets’ latest annual report, the company’s revenue fell by 250 per cent for the year to June 30, 2020, with US$13.3 million in asset impairments.

CoAssets was previously listed on the Australian Securities Exchange in 2016, but applied to delist last April, citing a low number of shareholders and low trading volume. It had earlier disclosed in end-2019 that it was being inspected by MAS, but it is unclear if any action was taken in the end.

THE BUSINESS TIMES

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