Hong Kong Firm to Launch Crypto Custody Services to Meet Institutional Investor Demand

Omar Faridi
  • Hong Kong and Singapore-licensed Fusang Investment Office will soon offer crypto custodial services.
  • Fusang Investment CEO Henry Chong stated that “the way we keep digital assets secure is of paramount importance.”

Fusang Investment Office, an asset management firm serving private Asian family businesses, will reportedly launch cryptocurrency custodial services for in Hong Kong. The service will be called Fusang Vault, and it’s expected to be introduced in Q4 2018.

Fusang Investment CEO Henry Chong stated that partnering with an independent third party specializing in the crypto sector was required in order to offer the crypto-custody services, as it will need to hold and periodically audit clients’ digital assets.

The University of Oxford graduate noted that his company was planning on providing insurance services for its customers’ crypto assets. Speaking to the South China Morning Post, Chong said:

Digital assets are akin to bearer bonds, whereby whoever that is holding the security is presumed to be the owner and there is no registration of ownership information of the security. Hence, the way we keep digital asset secured is of paramount importance.

Henry Chong

Meanwhile, Jolyon Ellwood-Russell, partner at law firm Simmons & Simmons, said that crypto-custody services were not yet regulated. This means that if a user’s crypto funds are lost or stolen, then they will have to rely on only the terms and conditions of their custodian services contract.

He also stated that there were several issues not addressed in the custodial services contract:

For example, in what capacity are the custodians holding the assets? Are they holding them as a bailment, that is, a trust, so the assets are outside the estate of the custodian on an insolvency. Just having segregated accounts does not automatically mean that on an insolvency the investors assets will be protected or recoverable from a receiver or liquidator.”

Jolyon Ellwood-Russell

Institutional Investor Demand

Despite Jolyon’s skepticism regarding custodial services for digital assets, several crypto companies already offer them. Notably, institutional investors have been “waiting on the sidelines” when it comes to cryptos, partly because of a lack of custodial services.

San Francisco-based cryptocurrency exchange Coinbase recently launched custodial services for cryptocurrencies in an attempt to tackle the problem. The company revealed their new service helps safeguard their clients’ assets by requiring multiple signers for all transactions.

The exchange’s crypto custody services also help customers keep their digital funds safe by setting withdrawal limits and providing audit trails. As recently covered, billionaire investor Mike Novogratz believes a “herd of institutional investors” is starting to move into crypto.

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Venezuelans File $30M Lawsuit Against "Diamond Backed" Crypto Ponzi Scheme

  • A $30 million lawsuit has been filed against a troubled cryptocurrency that claimed to be backed by diamonds.
  • Over 300 amateur investors were defrauded by the owners of two diamond companies, who attempted to create a cryptocurrency to keep a failed Ponzi scheme running. 

A new lawsuit filed this month has revealed further details about what took place behind the scenes at the troubled cryptocurrency "Argyle Coin."

According to the lawsuit, the entire cryptocurrency project was nothing more than a desperate attempt to keep a pre-existing Ponzi scheme alive and repay investors who were anxiously awaiting their dividends.

The group of Venezuelans behind the lawsuit say that they are among 300 amateur investors who got caught up in the Ponzi scheme, according to Law360.

The alleged masterminds of the scam, Jose Angel Aman, Harold Seigel, and his son Jonathan Seigel, ran two diamond trading firms Natural Diamonds and Eagle Financial. The two companies were connected with Argyle Coin, a cryptocurrency Ponzi scheme which was said to be backed by diamonds.

Natural Diamonds predated Argyle Coin and seems to be where the scam originated. The firm reportedly lured investors to pour money into their operations by overstating their expertise in the diamond industry.

Since 2014, Aman was promising investors a 24% return on their investment within two years through his company Natural Diamonds, having no clue how he was going to fulfill his promises. By 2015, Aman was working with his two accomplices, selling fraudulent investment contracts through Eagle Financial, and using those funds to pay back previous investors.

According to court documents:

“[Eagle Financial] and its principals overstated their experience in the diamond and jewelry businesses to lure investors into trusting [Eagle Financial] and its principals with their investment.”

The lawsuit suggests that the fraudsters used all of the investments that they received paying back previous clients, and never actually did anything with the money that would earn a return. Still, the defendants in the case continued to lie to investors and promise unrealistic returns to their investors.

Then, things became even worse when the men behind the scheme decided to develop a cryptocurrency project to raise funds.

They made very similar promises with Argyle Coin, reportedly telling investors that putting their money into their diamond-backed cryptocurrency was a “risk-free” venture, while once again using that money to back other investors.

Sadly, the investors were left out in the cold when the project never materialized, and the Ponzi scheme came crashing down. This is just the latest in over a dozen lawsuits against the failed crypto project.