Has the dust settled in the Crowdfunding scene after CoAssets Group fiasco?

CA Funding formerly known as CoAssets Pte Ltd, a Singapore-based crowdfunding platform, is in the process of winding down its operations. Its investors, regulators and the borrowers are seeking for answers of what has transpired, resulting in the media headlines 

What happened?

According to the article from Singapore Law Watch, CoAssets Group, which had left hundreds of investors devastated in December 2020 after CA Funding revealed that it had transferred US$30 million of receivables to debt recovery firm Sunfits, a Hong Kong-based company. Sunfits could not recover the debt, meaning investors, mostly promissory note holders issued by CA Funding subsidiaries, are likely to lose the money they put in.

So, the question beget, is crowdfunding platform a viable instrument for investors and borrowers?

Yes. However, the industry watches highlight the issue of transparency and investor education. These two crucial elements will impact the future of crowdfunding.

While the CoAssets saga continues, crowdfunding operators should provide the following assurance to investors:

  1. Balance economic risks and benefits: Perform Due Diligence on the lenders. Have Control of the crowdfunding platform and your partners, perform an Enhanced Due Diligence on any “special” purposes vehicles 
  2. Accountability: It is the Crowdfunding Platform responsibility to monitor its agents setting up their lending vehicle
  3. Disclosures: Implement advanced, fair and transparent Risk Disclosure  
  4. Investor Protections:
  5. Regulatory Disclosures
  6. Segregation of investor’s monies
  7. Transaction Data Management: keep proper records of transactions

We are still in relatively early stage of this highly entrepreneurial finance sector. The investors considering investing should consider promoted vehicles with caution, do their own all-important checks on the deals that they are going to invest and be aware of the risk involved.

What is crowdfunding and lending-based crowdfunding?

Crowdfunding is a method of raising funds from individuals through crowdfunding platforms. 

Lending-based crowdfunding or peer-to-peer lending (“P2P”) is one type of crowdfunding platform which refers to another way for the company to raise funds from a pool of lenders. The company will commit to return the loan at a pre-determined time and interest. The loan is usually facilitated via an online platform. Equity-based crowdfunding is another model of P2P lending model. P2P is only an option for the right company if the sum required is large enough, angel investors willing to invest small amounts in a young SME are another form of P2P lending. The process when seeking small investments from a large number of angel investors is called crowdfunding.

How can we help?

Fundraising from the P2P lending is regulated by MAS under the Securities and Futures Act (Cap. 289) (the “SFA”) and the Financial Advisers Act (Cap. 110) (the “FAA”). We are here to guide you on how to comply with the provisions of the SFA and FAA and other MAS Industry Guidance.

Alba Compliance Pte Ltd (www.albacompliance.com) is a full suite compliance advisory specialist, can assist you in applying for a Capital Markets Service license to conduct a security-based crowdfunding platform. Alba Compliance is here to support a compliant business in line with your model, mechanisms and strategies, assist in explaining how practically enhance your operations, market position and investors trust in accordance with recent regulatory changes.