A crowdfunding firm hasn't made payments to investors, highlighting risks in the sector, although authorities in Singapore have recently moved to toughen up standards.

Investors beguiled by the temptations of crowdfunding, a form of finance that has become popular in recent years, have had another reminder of the risks amid media reports out of Singapore about a failed business called First Asia Alliance.

A number of schemes marketed by FAA for firms haven’t made promised payments to investors, according to the Straits Times (of Singapore). At least eight investors have put in some $665,000 into the four investee firms since May 2013, according to police reports and documents seen by the publication. A police spokesperson declined to comment on the matter to the news service.

The investee firms are Mycofarm Mushroom, engaged in the growing and trading of mushrooms; US Invest (S) that conducts real estate activities; Merx & Co, which is in the wholesale trade of bags, luggage and travel accessories; and Professional Administrative & Support Services (Pass), which offers business and management consultancy services, according to the Accounting and Corporate Regulatory Authority, the report said.

Crowdfunding is one of several new “alternative finance” models to have arisen in recent years as conventional sources of funding, such as banks, turned off the taps since the 2008 financial crisis as capital requirements expanded. Another form of alternative finance is peer-to-peer lending, seen as cutting out the bank middleman in lending. P2P is not without its risks and controversies. Earlier this year, for example, a scandal broke in China revealing the biggest ever case of a Ponzi-scheme fraud in the country, and which has also engulfed its largest peer-to-peer lender. Reports said Chinese authorities busted a Ponzi scheme involving over RMB50 billion ($7.6 billion). The case surrounds Ezubao, a P2P operation.

Documents showed investors via the First Asia Alliance platform had been offered monthly returns ranging from 1 to 2.5 per cent for periods of up to six months on their investments, it said. Investors said they did receive the first few tranches of payments as stated in their contracts; subsequent cheques bounced. The Monetary Authority of Singapore has stated that First Asia Alliance is not licensed or regulated by the authorities, although it was placed on the MAS Investor Alert List in April, the report said. 

First Asia Alliance's sole shareholder and director, Joel Lam, owned stakes in at least two of the firms it marketed - Merx and US Invest. Lam was reportedly declared bankrupt last year; the First Asia Alliance website has been taken down. 

The Singapore regulator has brought in new, tougher licensing for crowdfunding platforms, ruling that those which deal with debt and equity have to obtain a licence to operate. Regulators in other jurisdictions, such as the UK, have sought to tighten oversight of the sector and prevent scams. 

Earlier this year, Rebus, a company that raised over £816,790 on crowdfunding site Crowdcube in 2015, went into administration, becoming one of the largest equity crowdfunding failures in the UK so far.