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Chinese investors, a Samoan high chief plot a cryptocurrency hub in paradise

China flag. (Unsplash)
September 15, 2023

This article was originally published by Radio Free Asia and is reprinted with permission.

At a slickly choreographed event in Hong Kong on April 26, the island nation of Samoa was introduced to a vision of its future: cryptocurrency and stock trading epicenter of the South Pacific.

Chinese officials and businessmen made speeches – their resumes beamed onto a giant screen at the luxury St. Regis hotel – as they celebrated the official launch of the Samoa Digital Asset Exchange, Samoa Stock Exchange and Oceania Blockchain Special Economic Zone.

A sprinkling of Westerners with finance industry backgrounds were introduced as advisers. Also revealed were a chief technology officer, chairmen, a chief operating officer and bright, generically abstract logos for each of the companies.

Mulipola Anarosa Ale Molioo, Samoa’s finance minister, spoke and posed for photos. The Samoan coat of arms, representing state authority and meant only for official use, was plastered and projected throughout the venue. 

But little more than a month later, after photographs from the Chinese event circulated online and caused disbelief in Samoa, Prime Minister Fiame Naomi Mata’afa was on a damage-control footing. 

The Samoan government had not given any endorsement or approval for the ventures, which were only proposals, said a statement from her office. 

The cryptocurrency episode was not the only controversy over poor governance and lack of transparency that Fiame was battling. 

Days later, she scuttled the first direct flights between China and Samoa after criticism of cabinet minister Laauli Leuatea Schmidt’s involvement in Samoa Royal Tours.

In conjunction with a Hong Kong travel company, it controlled tours in Samoa for the influx of Chinese visitors that began in late May. Samoa Royal Tours was registered as a company in Samoa in April and its shareholder was one of Laauli’s daughters, Rosary Leilua.  

BenarNews has found that Laauli, one of Samoa’s most powerful politicians, is also linked to the effort to make Samoa a South Pacific crypto-finance center and that the cryptocurrency and Chinese tourism ventures overlap in other ways. Chinese businessmen involved in the effort to bring more Chinese tourists to Samoa also hold key positions in the stock exchange and cryptocurrency ventures.

BenarNews and affiliated news organization Radio Free Asia reviewed Samoa Business Registry and other corporate records, information in Chinese-language media reports and financial databases and photos from the Hong Kong launch.

“I believe I have no obligation to reply to your request,” Laauli said in response to a list of his connections to the exchanges compiled by BenarNews. “You can report whatever you wish for the issues you requested.”

Samoa’s economy is small and its financial system underdeveloped.

Cryptocurrency and stock exchange ventures could have reputational and financial risks for the country and might also run counter to the government’s objective of making the financial system more accessible. Less than half of people have bank accounts and onerous requirements for loan collateral inhibits lending to businesses, according to the Asian Development Bank.

Home to about 200,000 people, Samoa also has a Chinese debt burden that is second only to Tonga among Pacific island nations when measured as a proportion of total national debt.

Fiame canceled a Chinese port project in 2021, to avoid becoming further indebted to China’s government. Through aid, infrastructure and lending, Beijing has become a significant force in the Pacific region over the past several decades.

Calls for minister’s resignation

Opposition politicians have called for the resignation of Laauli, who is the cofounder with Fiame of Samoa’s current ruling party and a high chief. A chiefly rank is a requirement to run for public office in Samoa.

Cryptocurrencies are virtual currencies such as Bitcoin that use encryption and dispersal over a computer network to purportedly avoid control by a central authority and to prevent counterfeiting. 

Proponents say they will usurp fiat currency that is created by central banks but they have also become associated with crime, extreme asset-price volatility and exorbitant energy use for the electronic mining of new cryptocurrency.

Numerous cryptocurrency exchanges collapsed in a chain reaction last year brought about by hacking and liquidity crises. Blockchain is the distributed database for recording cryptocurrency transactions. 

The companies held out in Hong Kong as Samoa’s financial future are registered in Samoa and appear to have been largely inactive until a series of changes to names, directors and shareholders between 2019 and 2022. 

A village chiefs council that includes Laauli’s village Sasina, and of which he is a leading member, became a shareholder in all three companies in the last quarter of 2022, Samoa Business Registry documents show. Laauli’s constituency office, meanwhile, is the registered address for the companies.

The council – Alii ma Faipule Fagaee Sasina Letui in Samoan – became a shareholder in Oceania Blockchain Special Economic Zone in November 2022 when shares held by Laauli’s daughter, Isadora Schmidt, were transferred to it, a shareholding document shows. 

Isadora Schmidt is the contact person in the business registry documents for Samoa Digital Asset Exchange and Oceania Blockchain Special Economic Zone, as well as a director of the blockchain economic zone. She didn’t respond to a request for comment. 

Alii ma Faipule Fagaee Sasina Letui became a shareholder in the Samoa Stock Exchange and Samoa Digital Asset Exchange in December last year when shares held by Lussil Tuala, the wife of the CEO of Samoa’s Gambling Control Authority, were transferred to it.

Several Chinese people with addresses in Hong Kong, Shenzhen, Fujian and Auckland, New Zealand are among the shareholders and directors. It is unclear whether they are genuine owners or nominee shareholders. 

Another shareholder in all three companies is China Yun Dat Investments. It is registered in the British Virgin Islands, which allows companies to keep ownership information secret. 

CPP presence at blockchain launch

The Hong Kong launch for Oceania Blockchain Special Economic Zone and its sister companies had a veneer of official Chinese government backing. 

The ceremony was attended by two Hong Kong Legislative Council members and two members of the Chinese People’s Political Consultative Conference, which plays a coordinating role in the ruling Chinese Communist Party’s “United Front” work that includes covert foreign-influence campaigns.

Chen Gen, who was announced at the event as the joint chairman of Oceania Blockchain Special Economic Zone, is a senior figure in Chinese state-adjacent organizations such as overseas Chinese chambers of commerce and the Chinese Academy of Management Sciences. 

Chen, according to a Chinese media report, accompanied Laauli on a 2018 tour of Henan province. 

More recently, Chen in his capacity as executive chairman of the Hainan Overseas Chinese Chamber of Commerce and other roles, helped to facilitate the now scuttled direct flights from Hainan to Samoa and organized a delegation of businessmen for the first flight, Chinese media reports show. 

Aside from Laauli, other high-profile Samoans connected to the exchange ventures are Siaki Tuala, the chief executive of Samoa’s Gambling Control Authority, and Lussil Tuala.

They said their law firm had provided administration services for the companies. They had temporarily acted as nominee directors and shareholders, they said, while the founders of the enterprises finalized partners for their venture.

Lussil Tuala, in response to questions, said: “Mr. Tuala and I had agreed to being listed as nominee directors only and as initial subscriber shareholders upon incorporation of companies when requested by these clients given their long standing relationship with Mr. Tuala as their former lawyer.” 

They said they had no financial interests in the blockchain economic zone and exchange companies. Siaka Tuala said the same situation applies to two other Samoa-registered companies they jointly owned with China Yun Dat Investments and one of the directors of Samoa Stock Exchange.

The cryptocurrency hub, for now, appears to have been relegated to no more than colorful logos and thwarted ambition.  

Samoa’s government said it would work with international financial organizations to carry out a feasibility study to identify all the risks, including to the country’s reputation.

“The intention of this study,” it said, “is to look at whether or not such an initiative will be beneficial for Samoa.”