Malaysia’s Home Affairs Ministry has launched an investigation into Network School, a co-living tech community founded by former Coinbase CTO Balaji Srinivasan in the massive, largely empty Forest City development in Johor. The probe centers on allegations that Israeli nationals entered the country using dual-citizenship passports, sidestepping Malaysia’s immigration ban on Israeli passport holders.

What happened and why it matters

Johor Chief Minister Onn Hafiz Ghazi has demanded that authorities investigate Network School’s visa practices, business activities, and building uses within the Forest City development. Malaysia does not maintain diplomatic relations with Israel, and Israeli passport holders are barred from entry. The allegation that some community members circumvented this policy using secondary passports from other countries is what triggered the probe.

Authorities plan to verify the identities, travel documents, and stated entry purposes of suspected individuals. This marks the first major regulatory scrutiny of Network School since its founding.

Network School launched in 2024 as a physical experiment in what Srinivasan calls “network states,” essentially communities organized around shared values and technology rather than traditional national boundaries. The community charges participants roughly $1,500 per month for co-living arrangements in repurposed buildings within Forest City, a sprawling development estimated at $100 billion that has struggled to attract residents since its inception. By mid-2025, the community had reportedly grown to accommodate around 400 to 550 participants.

The Forest City paradox

The community attracted digital nomads and tech entrepreneurs looking for affordable bases in Southeast Asia. It hosted significant events, including the opening of Coinbase’s Base Layer 2 network facility, called Base Builder’s Loft, on May 28, 2026. Srinivasan, who served as Coinbase’s CTO and is also a former general partner at Andreessen Horowitz, has been one of the most vocal advocates for network states. His 2022 book, “The Network State,” laid out a framework for digitally connected communities that could eventually achieve some form of diplomatic recognition.

Crypto connections and market implications

No specific cryptocurrency tokens have been directly implicated in the investigation. This isn’t a fraud case or a token scheme. It’s fundamentally about immigration compliance and governance.

The Base Layer 2 connection adds another layer. Coinbase chose to establish a physical presence within Network School just weeks before the investigation became public. Whether that facility faces any operational disruption remains unclear.