Hong Kong’s Securities and Exchange Commission (SFC) today issued a warning about a suspicious investment product called “LENA Network” that involves virtual betting, lending and asset-lending arrangements and claims to offer high returns to investors.
The product has not been approved by the SFC for offer to the Hong Kong public.
The product exhibits characteristics of a collective investment scheme (CIS) as defined in section 1 of Part 1 of Schedule 1 of the SFO. Under section 103 of the SFO, it is an offense for a person to issue, whether in Hong Kong or elsewhere, an advertisement, invitation or document which is or contains an invitation to the Hong Kong public to acquire an interest in or participate in a CIS, unless if the SFC has approved the issue or an exemption applies.
Generally, CIS must be sold by an intermediary licensed or registered with the SFC. Unauthorized CIS can generally only be sold to professional investors.
The SFC notes that information about the product and the product itself is accessible to the Hong Kong public via the internet. This led the SFC to add the product and its related information to the SFC’s Suspicious Investment Products Alert List on 13 May 2024.
The regulator is warning investors about “staking” arrangements related to virtual assets. As these arrangements could amount to unauthorized collective investment schemes and can be particularly risky, their investors have no or very limited protection under the SFO and may lose all their investments. In addition, the public should be cautious and skeptical of “too good to be true” investment opportunities and remain vigilant when making investment decisions.