(Bloomberg) -- Singapore’s financial regulator said it is engaging with Chocolate Finance, a robo-advisory firm, after the startup experienced a surge in customer requests to redeem their investments and halted instant withdrawals.
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The Monetary Authority of Singapore said in a statement on Wednesday that the goal is “to ensure that all customer withdrawals will be met in an orderly fashion.”
The regulator got involved after Chocolate Finance earlier this week suspended instant withdrawals, following a demand surge that was apparently triggered by frustrated users of its debit cards.
Chocolate Finance was founded in July last year and is licensed by the MAS. It has described itself as a place for people to park their spare cash, and also offers other financial services. According to its website, depositors can earn 3.3% per annum on their first S$20,000 ($15,005), and if they deposit US dollars, they can earn 4.6% per annum on their first $20,000.
The robo advisor puts clients’ money in a portfolio of fixed-income funds to earn those target returns. By February, Chocolate Finance had almost S$1 billion in assets under management and more than 60,000 customers, according to its website. The firm also said the deposits it takes are not covered by Singapore’s deposit insurance, because Chocolate Finance is not a bank.
The firm had recently introduced an airline mileage rewards program to attract more customers, and some of them tried to rack up miles by paying many of their bills with its cards, the company’s Chief Executive Officer and founder Walter de Oude said in a post on LinkedIn on Tuesday.
When bill payment volume surged, the company disabled its card payments on electronic machines that many Singapore residents use to pay their bills. That angered some customers and triggered an increase in withdrawals, de Oude said.
Chocolate Finance is operated by a local company, Chocfin Pte., and Allfunds, an independent fund custodian. On Wednesday, the two companies said in a joint statement that customers’ funds are secure and that they are processing withdrawal requests.
“Customer investment funds’ holdings are completely segregated and ringfenced,” David Perez de Albeniz, CEO at Allfunds Singapore, said.
Chocolate Finance and Allfunds also said they have fully complied with rules including holding customers’ funds in independent custody by licensed firms, according to the MAS statement.