The Securities and Futures Commission (SFC) of Hong Kong today issued a warning of a suspicious investment product named “LENA Network” involving virtual asset-related staking, borrowing and lending arrangements, and claiming to offer high returns to investors.
The product has not been authorised by the SFC for offering to the Hong Kong public.
The product displays characteristics of a collective investment scheme (CIS) as defined in section 1 of Part 1 of Schedule 1 to the SFO. It is an offence under section 103 of the SFO 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 the SFC has authorised the issue or an exemption applies.
In general, CIS must be sold by an intermediary licensed by or registered with the SFC. Unauthorised CIS may generally be sold to professional investors only.
The SFC notes that information regarding the product and the product itself are 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 warns investors of “staking” arrangements relating to virtual assets. As these arrangements could amount to unauthorised collective investment schemes and may be highly 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 sceptical about “too-good-to-be-true” investment opportunities, and stay vigilant when making investment decisions.
