Malaysia has ordered the immediate closure of Balaji Srinivasan's Network School in Forest City, Johor, which is a major setback for one of the bitcoin entrepreneur's most ambitious real-world companies. On July 22, 2026, authorities revoked the business license of operator NSO Malaysia Sdn Bhd, and all operations were mandated to cease. Even though an immigration inquiry attracted a lot of attention, officials eventually declared that licensing concerns were the main reason for the closure. The case has become famous as an example of how creative IT groups can nevertheless have to cope with strict municipal laws.

Social Media Allegations Led to a Multi-Agency Investigation

Social media reports claiming that Network School had allowed Israeli nationals to enter Malaysia with second-country passports sparked the outrage. Due to Malaysia's lack of diplomatic connections with Israel and its overall policy of prohibiting Israeli passport holders from entering the nation, authorities have initiated an extensive inquiry involving immigration agents and other government agencies.

In 2024, former Coinbase CTO Balaji Srinivasan started Network School, which was immediately scrutinised. 266 foreign nationals from 40 nations were examined by immigration officers, who verified that they had legitimate travel documents.

The broader inquiry included 430 members of the community. The Immigration Department of Malaysia said that 210 people were still in Malaysia, 201 had already left, and 19 were unaccounted for. As a result, authorities continued to investigate whether any illegal movements had occurred.

Given Forest City's advantageous location close to Singapore, Johor Menteri Besar Onn Hafiz Ghazi directed authorities to thoroughly look into potential identity theft, second passports, and any other issues that may threaten Malaysia's sovereignty or national security.

The probe proceeded in line with independent regulatory inspections, even though immigration authorities subsequently claimed to have discovered no proof of passport misuse.

Licensing Violations Became the Real Reason for the Shutdown

Although the immigration investigation gained coverage in the press, local authorities stated that company licensing irregularities were ultimately the cause of the closure. During inspections on July 12, 14, 19, and 20, the Iskandar Puteri City Council (MBIP) found several violations of the project's operating premises.

Officials claimed that one facility was operating completely without a business license, while another had only been authorised as an office and was being utilised for commercial operations such as business promotions and classroom activities that were not permitted under its authorisation. Non-compliant business signage was also cited by authorities.

In response to these conclusions, MBIP issued a cease-operations order that took effect on July 22 and terminated NSO Malaysia Sdn Bhd's licenses.

The regulatory action was not limited to municipal governments. The company's Malaysia Digital (MD) designation was also cancelled by the Malaysia Digital Economy Corporation (MDEC), which claimed that it had not complied with the program's licensing and legal requirements.

The state administration of Johor emphasised that while Malaysia welcomes investment, all organisations must abide by local rules, regardless of their technological expertise or foreign support.

Should the global tech community continue investing in Malaysia?

Given recent events, I raise this question respectfully for the consideration of Prime Minister Yang Amat Berhormat Dato’ Seri Anwar bin Ibrahim (@anwaribrahim), for the people of Malaysia, and for our friends in… pic.twitter.com/0kvDSfF1z9

— Balaji (@balajis) July 16, 2026

The Economic Stakes Behind the Shutdown

Network School was created as a private residential community for digital nomads, investors, researchers, developers, and entrepreneurs. With monthly memberships starting at $1,500, members lived, worked, and studied together through a combination of coworking spaces, co-living areas, educational programs, and networking events.

According to Balaji Srinivasan, Network School members come from more than 100 countries. He has described the project as an attempt to bring online communities together in the real world, arguing that by living and building alongside one another, they can prove that internet-native communities are capable of cooperating offline as well.

The initiative embodied Srinivasan's overarching goal of turning virtual networks into actual "startup societies." Its Malaysian campus was built inside Johor's Forest City, a mixed-use development valued at about US$100 billion.

The project was planning an additional RM500 million expansion and had already committed more than RM100 million in its Malaysian campus before the shutdown. Additionally, Srinivasan had stated that venture capitalists and global technology leaders were looking into making more investments in the project.

Those plans are now on hold. Following the investigations, Srinivasan requested greater regulatory certainty and sought assurances that future technology investments could proceed without similar disruptions.

Kazakhstan Becomes Network School's Next Destination

The project's closure in Malaysia was short-lived.

Srinivasan signed a Memorandum of Understanding (MoU) with Kazakhstan to create a new Network School campus shortly after the shutdown order. Through accelerated visa routes and initiatives focused on innovation and artificial intelligence, the agreement supports the recruitment of international technical talent.

The quick move shows how rapidly communities that prioritise digital technology can relocate internationally when regulatory conditions become challenging. The Malaysia incident also draws attention to a more general issue that the world's technological communities must deal with.

Srinivasan has also been advocating the startup city concept beyond Malaysia. Following a recent meeting with the Delhi Chief Minister, he noted that Network School members come from more than 100 countries.

Projects centred on remote work, cryptocurrency, and digital entrepreneurship may be borderless online, but if they set up physical campuses, they remain bound by the laws governing immigration, business licenses, and regulations in the nations where they operate. Network School's shutdown serves as an example of how these legal requirements must be fulfilled before even well-known technological endeavours with substantial financial commitments can continue.

I am pleased to announce that a memorandum of understanding has been signed between the Republic of Kazakhstan and Network School.
Our new campus will become a haven for global techno-optimism, with expedited visas, streamlined redomiciliation, and active recruitment of talent. pic.twitter.com/R20i8UAYoc

— Balaji (@balajis) July 21, 2026

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