The Securities and Futures Commission (SFC) today warns the public 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 (Notes 1 and 2).
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 post the product and its related information on the SFC’s Suspicious Investment Products Alert List on 13 May 2024.
On this note, the SFC would like to warn 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 (Note 3).
The SFC will take all appropriate actions where there is any breach of the law.
Notes:
- 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.
- It is an offence under section 114 of the SFO for a person to carry on, or hold himself out as carrying on, a business in a regulated activity (which will include promoting interests in a CIS) without a licence where required. It is also an offence under section 115 of the SFO for a person to actively market, whether in Hong Kong or from a place outside Hong Kong, to the Hong Kong public any services that the person provides and such services, if provided in Hong Kong, would constitute a regulated activity.
- In its Statement on virtual asset arrangements claiming to offer returns to investors issued on 13 December 2022, the SFC reminded investors of the risks associated with virtual asset arrangements (including “earnings” and “staking” services) and also the persons engaging in these arrangements that they could amount to a CIS.
