A rush among users to withdraw funds forced the firm to temporarily suspend instant withdrawals, but founder and CEO Walter de Oude says “at no point is customer money at risk”.

Chocolate Finance’s founder says the company “mistakenly implied” that AXS disabled its debit card last week, frustrating users and causing them to withdraw their funds from the Singapore-based financial services platform.

Walter de Oude, who is also CEO of Chocolate Finance, took to LinkedIn on March 10 to explain the chain of events that led to his firm suspending withdrawals a day earlier. 

The Singapore-based company had partnered with local loyalty platform Heymax.ai in early February to launch the HeyMax Miles partnership for Chocolate Finance Visa debit cardholders. With two miles per dollar spent, cardholders paid various bills via AXS to rack up miles.

But bill payments, especially through AXS, “surged far beyond expectations, making the programme unsustainable”, reads de Oude’s post. 

In turn, Chocolate Finance disabled its debit card from AXS on March 5. However, this “happened so fast” that Chocolate Finance “communicated this change poorly”, says De Oude, who launched the platform in July 2024.

Initially, Chocolate Finance “mistakenly implied” that AXS initiated the change, says De Oude. An AXS spokesperson later disputed this, saying the removal “was made at the request of Chocolate Finance”. Chocolate Finance “later corrected” this in its FAQ page, adds De Oude.

“Customers using AXS were frustrated by the sudden removal. This led to negative reviews, increased withdrawals and overall negative sentiment,” writes De Oude. 

A resulting rush among users to withdraw funds forced Chocolate Finance to temporarily suspend instant withdrawals, with a notification stating this would only resume at 6am on March 10. 

Later, Chocolate Finance stated in a notification to users that “withdrawals made during this period will take three to 10 working days”, and once confirmed, these withdrawal requests “cannot be cancelled”. 

Chocolate Finance pushed an app update to its users in the afternoon. 

Prior to the suspension, customers could apply to instantly withdraw up to $20,000 a day.

How withdrawals work

In his LinkedIn post, De Oude says Chocolate Finance invests in short-term funds and customers’ money is held in “segregated accounts”. 

To allow for instant withdrawals, Chocolate Finance “fronts the cash before receiving settlements” two working days later, he adds. When customers withdraw money, Chocolate Finance sells the equivalent investments and returns the proceeds either instantly or after settlement.

“A withdrawal spike can deplete our liquidity buffers, requiring a temporary pause,” says De Oude.

If instant withdrawals are paused due to a spike, they switch to the “standard” three- to six-day settlement timeframe and remain “fully functional”, he adds. 

“This does not affect Chocolate’s financial stability at all,” De Oude says. “At no point is customer money at risk. In fact our liquidity programme is designed purely to enhance the timing of customer cashflows.”

Chocolate Finance launched in July 2024, and reportedly has assets nearing $1 billion. De Oude also founded Singlife back in 2014. 

MAS ‘querying’ Chocfin

In response to The Edge Singapore’s queries, a Monetary Authority of Singapore (MAS) spokesperson notes that Chocolate Finance is an online robo-advisory service operated by Chocfin Pte Ltd. 

Chocfin holds a Capital Markets Services (CMS) license for fund management. As a CMS licence-holder in fund management, Chocfin is required to segregate customers’ monies from its own monies and place customers’ monies under independent custody, says the MAS spokesperson.

“Chocfin is also required to put in place a risk management framework and provide clear and transparent disclosures on the terms of its services, including circumstances where redemptions may not be instantly available,” adds the spokesperson. 

MAS notes that Chocfin has provided clarifications on its redemption timelines and has instructed Chocfin to ensure that it meets all redemptions in an orderly manner and to keep customers informed of developments.

MAS is separately querying Chocfin about its representations of its instant withdrawals programme.

What happened on March 10

On March 10, Chocolate Finance issued an official press statement saying that it has temporarily paused its instant withdrawal and card transaction services due to a “period of unusually high withdrawal requests”. 

“Due to the recent temporary surge in withdrawals, we have paused this programme and reverted to the standard fund redemption process, which takes 3-10 business days to settle. This pause is not a liquidity issue but a matter of managing our increased transaction volume. Chocolate card transactions are also temporarily paused as we actively implement measures to manage this volume and expedite the return to normal service,” the statement reads.

As Chocolate Finance is not a bank, customers’ funds are not covered by the Singapore Deposit Insurance Corporation (SDIC), which insures deposits of up to $100,000.

Users’ funds are pooled and invested in short-term, investment-grade bonds, and assets may also be invested in money market funds and short-duration, fixed income funds.

Chocolate Finance’s investors include Peak XV Partners (previously known as Sequoia Capital India and South-east Asia), Prosus, GFC and Saison Capital.

Saison Capital partner Looi Qin En claims in a March 10 LinkedIn post that there have been “many falsehoods being spread”.

“Yes I have (personal) money in Chocolate. No, I’m not withdrawing. I don’t usually share this, but it is important to walk the talk — in a moment where FUD and rumours are rampant, and people are fearmongering each other,” writes Looi, who has more than 41,000 followers on the networking site. FUD stands for “fear, uncertainty and doubt”. 

Prior to Chocolate Finance’s official statement, Looi sent a message to some 10,000 members of a personal finance group on Telegram, saying: “Walter de Oude, the founder / CEO of Chocolate was the founder of Singlife. He is one of the strongest founders in the region, period. This is not his first rodeo."