SC and Bank Negara caution over unauthorised ICO activities

KUALA LUMPUR: Hot on the heels of Singapore-registered CopyCash Foundation ceasing its planned initial coin offering (ICO) in Malaysia, the Securities Commission (SC) and Bank Negara have jointly cautioned the public about ICO schemes which may involve activities that are subject to laws administered by both regulators.

As such, carrying on such activities without proper authorisation is an offense, the central bank and SC said in a joint statement.

“Issuers of ICOs should be mindful that the launching of an ICO, the offering of digital tokens in exchange for digital currency or any form of payment and incidental activities thereof, may trigger regulatory requirements under securities laws. In addition, no person is permitted to carry out any regulated activities such as fundraising, fund management and dealing in capital market products without obtaining necessary approval or authorisation from the SC,” they noted.

Further, ICO operators are prohibited from undertaking regulated activities such as deposit taking and banking business, foreign exchange administration activities and remittances, without the necessary authorisation under financial services laws administered by Bank Negara.

Members of the public are reminded to exercise caution before participating in an ICO and are advised to refer to the list of institutions that are licensed or approved to carry out regulated activities under the laws administered by the SC and Bank Negara.

Both authorities would continue to monitor these developments and would not hesitate to take action against any person conducting illegal or unauthorised activities, they added.

CopyCash was recently issued a stern directive by the SC for it to cease operations in the country due to the trading platform violating in-place regulations. The regulator warned it would not hesitate to rein in others who try to contravene securities laws.

The directive was issued after it found that there was a reasonable likelihood that disclosures in CopyCash’s white paper and representations to potential investors would contravene relevant requirements under securities laws.

CopyCash CEO Bobby Lieu, who is Malaysian, was reported to had planned to launch the ICO of CopyCashCoins worth about RM50mil (S$16.6mil) at a hotel in Petaling Jaya on Jan 10. Out of this, RM30mil was offered to the public, with the remainder through private placements.

On another note, Lieu was also reportedly involved in digital currency Kracoin, which was later discovered to be a pyramid scheme. Kracoin was championed by investment fund company 5 Forces Capital (5FC), where he served as chief operating officer.

In 2015, Lieu represented 5FC to form a strategic partnership with DaoShang (Beijing) Investment for the listing of Kracoin on the New York Digital Currency Exchange. There has not been any further development since.