[Speed ​​Reading Package]Learn about Chocolate Finance's “squeezing” in one article?

Chocolate Finance suspended instant withdrawals on Monday (March 10) due to the “high demand for users to withdraw money” (commonly known as squeezed withdrawal).

The company issued a notice saying that the platform is facing an unusually large number of withdrawal requirements. Withdrawals made during the period will take three to 10 days to arrive. Once the withdrawal request is confirmed, it will not be cancelled.

What is going on with the “too high demand” of withdrawals? How does this company work? Is it regulated by the Monetary Authority of Singapore? Lianhe Zaobao answers you one by one.

Chocolate Finance is a financial services company founded last July and is headquartered in Singapore. Less than a year since the company was established, it has 60,000 customers. As of February this year, the company's assets under management were close to 1 billion yuan.

The company's founder Walter de Oude is the founder of Singapore's first digital insurance company Singlife. He founded Singlife in 2014 and worked at the company for more than seven years until he left the company in 2022.

Before founding Singlife, Deao was the vice chairman of insurance operator Aviva and also worked in HSBC Insurance Singapore for more than seven years, including CEO. He also provided actuarial-related consulting services at the consulting firm Willis Towers Watson.

Chocolate Finance's investors include Peak XV (formerly known as Sequoia Capital), Tencent Holdings' major shareholder Prosus, and international investment group DST Global. Henry Golding, a mixed-race male lead in “Crazy Rich Asians”, is the company's brand ambassador and investor.

Competitors include Endowus, WeInvest, StashAway, and Syfe.

When the company was first established, it thought it would bring higher cash returns to its customers. As a promotional call, the first 20,000 yuan invested by investors can earn a return rate of up to 4.2%. Against the backdrop of a decline in the end-of-return yield of six-month T-bills, the return of 4.2% is quite attractive.

According to the company's website, the current rate of return is the first 20,000 yuan that can earn a return of 3.3%. If the amount exceeds this amount, you can earn a return of 3%. This is still higher than the current cut-off yield of Treasury bills.

Investors deposit funds into Chocolate Finance accounts to purchase investment portfolios composed of fixed income funds. The company noted on its website that these funds are screened based on factors such as investment maturity, return on maturity, credit quality and currency, and they are all “chosen carefully to optimize risk-adjusted returns.”

These funds include UOBAM United SGD Fund, Fullerton Short-term Rate SGD Fund, and Nikko AM Shenton Short-term Bond Fund.

Chocolate Finance client Lin Wenguang is one of the retail investors who quickly asked to take out the funds in the account after hearing the large withdrawals from the crowd.

In an interview with Lianhe Zaobao, he revealed that in the past seven months, he had deposited a total of 40,000 yuan in his account and earned about 700 yuan in interest. He said: “I'm still waiting for the company to return the money to me. At present, I can only wait for the matter to be settled before considering whether to continue investing.”

The company worked with electronic payment company AXS last month to enable customers to earn mileage points for AXS payments. But Deao said the surge in bills for payments through AXS “far exceeding expectations” made the company's partnership with AXS “unsustainable” and eventually canceled support for AXS payments.

This has led to the company's dissatisfaction and negative comments from many customers, which has led to an increase in withdrawals.

Regarding this matter, Chocolate Finance explained that the suspension of instant withdrawal services is to cope with the sudden surge in withdrawal requirements, rather than encountering liquidity issues. At the same time, the company's withdrawal card transactions were also suspended simultaneously, “We are actively taking measures to manage transactions and accelerate the recovery of normal services.”

Company founder Deao posted on LinkedIn on Monday that Chocolate Finance “advanced” cash before receiving the settlement. He added that the surge in withdrawals will drain the company's liquidity buffer and therefore the company needs to suspend instant withdrawals.

The company assured customers that the platform is still a stable and reliable place for customers to store idle funds.

Before the withdrawal is suspended, customers can apply for instant withdrawal of up to 20,000 yuan per day.

Market insiders pointed out that Chocolate Finance vows to provide investors with immediate liquidity in capital, but the money has been used for investment. If investors request withdrawals, the company must pay out of their own pockets. The key question at this stage is how the company's financial situation is and whether this business model is sustainable.

According to the Chocolate Finance website, its funds are kept separately by custodians including HSBC. Since it is not a bank, customer deposits are not covered by Singapore Deposit Insurance Corporation (SDIC).

Under the deposit insurance scheme of Singapore Deposit Insurance Company, deposits of Singapore banks and financial institutions can be protected when these institutions are in crisis. The maximum insurance limit is 100,000 yuan.

Regarding this incident, a spokesperson for the HKMA said in response to the Lianhe Zaobao inquiry on Tuesday (11th) that Chocolate Finance has clarified the timetable for redemption funds, and the authorities instructed the company to ensure that all redemption requirements are fulfilled in an orderly manner and promptly notify customers about the latest developments. In addition, authorities are asking the company's statements regarding immediate withdrawals separately.

The spokesperson pointed out that Chocolate Finance is an intelligent investment advisory service provided by Chocfin, which holds a fund-managed Capital Markets Services (CMS) license.

Under the license held by Chocolate Finance, the company must separate the client funds and its own funds and place the client funds under independent custody.

At the same time, companies must develop a risk management framework to make clear and transparent disclosures of the services they provide, including in some cases where funds may not be redeemable immediately.