Banking

Investors left in the lurch as investment platform CoAssets runs into trouble

Fri, Jan 01, 2021 – 5:50 AM

Singapore

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, the financial regulator does not disclose its dealings with regulated financial institutions, said a spokesperson.

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 in early December when it came to light that the Singapore-based alternative lending platform had transferred US$30 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 Dec 28, 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 CEO) and Seh Huan Kiat, and have grouped together on social media channels such as Telegram to pursue legal action. When queried by The Business Times if the Commercial Affairs Department was handling the matter, the police only confirmed that reports were lodged.

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

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

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 on 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.

On talks of a potential merger with DWG, Mr Goh had convinced investors to stay onboard and extend the payment deadlines for many of the promissory notes that were set to mature in 2020, claiming that the notes were contractually guaranteed by DWG and Mr Wee. This came as Covid-19 was the final nail on the coffin, hitting the alternative lending industry hard and drying up funding.

However, investors who were counting on this 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 claims that it had discovered “irregularities, misinformation, and suspicious transactions” when it looked into CoAssets.

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

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

He 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 that the promissory notes were backed with collateral and personal guarantees.

In early 2020, CoAssets had told investors that it had 17 kg 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 later applied to delist in April 2020, 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.


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