CoAssets Situation Explained: MAS and CAD Launch Joint Investigation into CoAssets Group
Joel Kohâ—Ź
1 February 2021 Update: CAD and MAS Launch Joint Investigation Into CoAssets Group
The Commercial Affairs Department (CAD), and the Monetary Authority of Singapore (MAS) announced that they have launched a joint investigation into various companies under CoAssets Ltd (CoAssets Group Companies) for possible offences under the Penal Code (Cap. 224) and the Securities and Futures Act (Cap. 289) (SFA).
Out of this group, the spotlight is being shone on Singapore based peer-to-peer lending (P2P)/Crowdfunding lending platform CA Funding Private Limited (CAFPL):Â a capital markets services license that is regulated by MAS.
This development comes on the back of an announcement by CAFPL on its website on 4 January 2021 that it will be shutting down:
MAS added that it will be ‘closely monitoring’ CAFPL’s cessation plans to make sure that investors who invested on CAFPL’s platform are treated fairly.
Prior to this, MAS has directed CAFPL to return its customers’ money; adding that ‘all customers’ money held by the company have since been returned to investors.’
Here are more details of the repayment process.
CA Funding Promissory Notes Repayments
According to CAFPL, its Promissory Notes (PN) investors rights are protected under Clause A of the security deed states that:
“Under the PN, Chargor is required to pay to the Payees (whether directly or through the intermediary) certain sums on or by the stipulated dates).”
In addition, Under Clause 4.3 of the Promissory Note, it states that:
“Payment shall be made by the Issuer via bank transfer into one account maintained with a local bank as may be notified by CAFPL to the Issuer. For avoidance of doubt, all of the Issuer’s obligations under this Note to any and all of the Payees shall be discharged upon payment of the relevant sums into such account. The Issuer shall be entitled to require presentation of the Promissory Note prior to payment. For the avoidance of doubt, the obligation to pay under this Note shall only be deemed to be discharged upon the bank transfer having cleared and the amounts payable being received in the bank account notified by CAFPL on the relevant Payment Date, Early Redemption Date or another applicable date.”
Recap of The CoAssets Situation (30 Dec 2020)
If you recall, Seedly is one of the first platforms to raise suspicion about CoAssets on 30 December 2020.
Here is a recap of what happened.
2020 has not been the best of years.
And unfortunately for retail investors who have vested money with CA Funding Pte. Ltd (formerly CoAssets Pte. Ltd), a debt-based crowdfunding platform based in Singapore – it seems to have gotten worse.
Note: CoAssets was rebranded to become CA Funding back in Nov 2020 to differentiate between the Monetary Authority of Singapore (MAS) regulated subsidiary and the rest of the CoAssets Group. However, as the name CoAssets is more widely known, we will be referring to CA Funding as CoAssets.
According to Tech in Asia, the company has allegedly winded up and transferred about US$30 million (S$39.8 million) of its debt to Hong Kong-based Sunfits Investments Limited; a little known debt recovery firm.
In a note that would be troubling to investors, Sunfits stated that it could not collect on the debt as there is no ‘visibility’ on any the assets.
As such, the ‘firm is insolvent. While some earlier investors got back their money, hundreds more will likely see their holdings evaporate entirely.’
As we speak, affected investors have been filing police reports in a bid to recover the investments held with CoAssets.
But how did things end up like this?
What can investors who have been affected do?
Here’s all you need to know!
To understand the situation, we need to go back to the formation of CoAssets in 2013.
The company was founded by co-founders Getty Goh and Dr Seh Huan Kiat, as a P2P/Crowdfunding lending platform.
This online platform allows retail investors to pool their money together to offer loans to small and medium-sized enterprises and property developers who list their projects on the company’s platform.
Rather than owning a stake in the business, investors’ money is loaned out. In turn, investors earn a return via interest payable on the loan.
Basically, the crowdfunding platform was created to serve the needs of smaller businesses with lower credit ratings.
These companies are generally unable to obtain loans from banks that deem these types of loans to be too big of a default risk.
But, this default risk could be somewhat managed if the crowdfunding platform has a diversified portfolio of loans.
As such, investors’ monies would be spread out and the risk reduced.
Also, another safeguard put in place is that CoAssets investors’ funds were held in a trust account.Â
Should the company become insolvent one day, the funds will continue to be handled escrow agency Vistra Trust. Loan agreements in place will not be dissolved and a reputable agency will be assigned to fulfil the service duties.
The company did well initially as it was listed on the Australian Securities Exchange (ASX) back in 2016.
Goh also hired former Chief Artillery Officer of the Singapore Armed Forces, Colonel Lawrence Lim, as the chief operating officer (COO) of CoAssets – Goh’s direct boss back when he was working for the Singapore Armed Forces.
In 2017, the company managed to obtain a capital markets service (CMS) licence from the Monetary Authority of Singapore (MAS).
However, it seemed that things were a bit rocky as the company announced a voluntary delisting from the ASX in Jun 2020, citing:
- Low shareholder numbers – The Company has less than 400 shareholders, of which approximately 124 or 33.3% hold unmarketable parcels (i.e. a shareholding of $500 or less).
- Low levels of trading liquidity – Trading in the Company’s shares has been limited, both in frequency and volume. The low level of liquidity has resulted in limited trading opportunities for shareholders who wish to exit their holdings.
- High ongoing costs – The Company incurs costs in excess of $750,000 per annum to maintain its ASX listing. This does not include any allocation of the cost of management’s time taken up by matters associated with being listed.
Initially, the company mainly listed real estate projects on its platform.
But after a while, the company, pivoted and moved into other Fintech related verticals and began offering financial products like Promissory Notes (PN).
The Trouble With CoAsssets Promissory Notes (PN)
According to Investopedia, a Promissory Note (PN) is a type of loan that:
- Contains a written promise by one party (the note’s issuer or maker) to pay another party (the note’s payee) a definite sum of money, either on-demand or at a specified future date.
- A promissory note typically contains all the terms pertaining to the indebtedness, such as the principal amount, interest rate, maturity date, date and place of issuance, and issuer’s signature.
- In terms of their legal enforceability, promissory notes lie somewhere between the informality of an IOU and the rigidity of a loan contract.
PNs issued by companies are rather risky as unlike banks and traditional financial institutional lenders that are offering loans, these companies brokering the PNs do not have the organisational capacity or loan volume to minimise the risk.
Potentially, the investor may get outsized returns. But, it is dependent on whether the payee does not default on the note.
In general, PNs are not made readily available to retail investors, with CoAssets one of the few companies to offer PNs to retail investors.
Promissory Note Problems
In an interview with Tech in Asia, Lawrence Lim highlighted the main issue with the PNs offered by CoAssets:
- Lim alleges that CoAssets set up over 10 plus unregulated subsidiaries to issue PNs to investors.
- Investors were kept in the dark about how the funds from the PNs were diverted to mainly one company that invested the money into a range of projects like tech startups and film productions. This increased the concentration risk.
- The PNs were offered to companies that CoAssets had stakes in.
- CoAssets did not inform investors that the companies in its portfolio had trouble repaying the loans and proceeded to continue raising funds.
- In early 2020, CoAssets continued issuing notes and informed investors it had 17 kilograms of emeralds worth about US$6 million (~S$8 million) in its possession that could be used as collateral.
- But later on, it was revealed that the emeralds were only worth US$15,000 (~S$19,900) in an independent valuation by Sunfits.
- Allegedly, Dr Seh and Getty Goh’s spouses were given sweetheart deals to cash out in early 2020 in internal emails seen by ​Tech in Asia.
Lim states that he attempted to put a stop to these practices as COO but was powerless to do so due to CoAssets’ actions.
As such, he left the company in July 2019.
In response, Goh has denied these claims and stated that he has refunded some of the affected investors out of his pocket.
However, many CoAssets investors who have invested in the PNs have claimed that they have not been repaid at the time of writing.
You can check out an example of this in the above-mentioned thread as Getty Goh has personally replied to some of the comments.
But, it is important to note that Getty Goh resigned as the Group Chairman on 8 Apr 2020 and as Group CEO on 1 Jul 2020.
He is now acting as the CEO of CoAssets.
Soured Deal With DWG
But, there appeared to be a light at the end of the tunnel for CoAssets and investors.
As early as 2018, there were talks of a merger between CoAssets and DWG group: one of the biggest real estate brokerage firms in Singapore. DWG has 10 branches globally located in Japan, Malaysia, Thailand and England.
With this news, CoAssets soothed its investors’ worries by informing them of the potential deal.
At the start of this year, Goh managed to convince investors to stay on by claiming the PNs were contractually guaranteed by DWG and its director Denka Wee in a contractual agreement.
However, investors who were hanging on to the hope of the capital guarantee with DWG were left reeling earlier this month (Dec 2020) after it was uncovered that DWG voided the agreement citing “suspicious activity” after a review of CoAssets documents.
As such, It appears any deal between DWG and CoAssets is not happening.
For now, the situation is still unfolding.
For a complete account of the situation, you can refer to the full Tech in Asia article.
Legal Action?
DWG, Sunfits, and CoAssets’ investors are also contemplating legal action.
On 29 Dec 2020, Getty Goh removed this post on his Facebook page.
In response, DWG also issued a statement about Goh’s personal Facebook comment citing:
DWG and Denka Wee (Director of DWG) will challenge and dispute all claims made by Mr Getty Goh on his personal Facebook’s comment and post on 29th Dec 2020. DWG described the post as false and defamatory, and “impugned its integrity”. DWG and Denka Wee will be filing a police report regarding the matters above and will seek full legal action against the personnel and his comments. DWG and its related personnel reserve all rights to take legal action for any act of libel. DWG has placed utmost importance on safeguarding its interest and takes any false allegations seriously to the contrary.
And on (31 Dec 2020), Getty posted this statement after removing the personal comment from his Facebook page.
Many individual investors have also made police reports against CoAssets, which Getty Goh still runs as the CEO.
A MAS spokesperson has also stated that it “is aware that police reports have been lodged against CoAssets.”
The spokesperson added that MAS will take necessary action if CoAssets has been found to have breached regulations.
We have also reached out to current CoAssets staff for clarification and will update the article if there are any updates.
If you are an affected investor, here is what you can do.
What Affected CoAssets Investors Can Do
At the moment, a group of investors who met on Seedly are gathering to take collective action.
Lawrence Lim the former COO of CoAssets is also actively helping the group out.
They have gathered in a CoAssets clients discussion group and a Telegram channel to coordinate efforts.
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