The founder of Network School states that the investigation by Malaysian immigration could jeopardize its technological aspirations.

      Balaji Srinivasan established Network School as a practical example of the “network state,” his concept that an online community of engineers and founders can eventually operate like a real nation. This week, a real nation reminded him of who controls the passports.

      The ex-chief technology officer of Coinbase and partner at Andreessen Horowitz stated on July 15 that a Malaysian immigration action at his co-living space in Forest City, Johor, jeopardized the country’s efforts to attract tech workers. He announced that he was halting a planned investment of US$500 million (RM500 million) until residents were guaranteed they wouldn’t be treated as illegal immigrants, in addition to over US$100 million he claimed was already pledged.

      The immigration operation was short-lived. On July 14, officials examined 266 foreigners from 40 nations at the site, according to data shared by immigration director-general Zakaria Shaaban. Out of those, 256 had social visit passes, and 10 had professional visit passes issued under DE Rantau, Malaysia’s digital nomad program. Shaaban stated all travel documents were verified, and no evidence was found to support the claim that prompted the inspection.

      That claim, which circulated on social media and was amplified by pro-Palestinian groups, alleged that Israeli nationals had entered with second-country passports. Malaysia does not acknowledge Israeli travel documents, turning the allegation into more of a diplomatic issue than merely a bureaucratic one.

      The concept behind Network School derives from Srinivasan’s 2022 book, which asserts that online communities can generate capital, establish shared values, and ultimately gain diplomatic recognition, in that order. Forest City was intended to serve as the tangible proof of this idea.

      Johor’s chief minister, Onn Hafiz Ghazi, directed federal agencies—including the immigration department, police, and customs—to verify identities and licenses. Officials mentioned that the broader inquiry, which includes land usage and educational regulations, would continue even after clarifying the passport issue.

      Launched in 2024, Network School offers three-month residencies starting at US$1,500 per month, including meals and gym access, and accepts cryptocurrency as payment. It embodies the network-state vision: a few hundred residents in an incomplete city built by China, originally designed to accommodate hundreds of thousands.

      Over the past year, Malaysia has been courting the tech industry while also regulating it, from data center incentives to a customs seizure of AI chips at its primary airport. The Forest City project sits uneasily at the intersection of invitation and inspection—a foreign-operated enclave that the state both endorsed and now scrutinizes.

      The DE Rantau visa, which 10 residents held, is part of that strategy, designed to attract remote workers to this specific location. This program contributed to Forest City being reclassified as a special financial zone, providing tax incentives for foreign companies and individuals.

      Srinivasan’s reaction was dramatic. He questioned whether “the global tech community” should continue investing in Malaysia and sought a meeting with Prime Minister Anwar Ibrahim to discuss a memorandum of understanding. He stated that the talks would be “crucial” if Malaysia wanted to maintain global tech investment and aimed to become a top 20 technology hub worldwide. If the government chose differently, he suggested he might redirect the capital of “billion dollar funds and trillion dollar companies” to other nations.

      The developer of Forest City, the Chinese firm Country Garden, expressed its willingness to fully cooperate with the relevant ministries. Anwar’s office had not publicly responded to the meeting request, and the immigration department maintained that the checks were routine and the paperwork valid.

      In an unusual twist on the typical immigration dynamic, where the government usually asks the questions, here the resident threatened to depart, taking valuable connections with him. As of July 17, no meeting with Anwar had been confirmed, the investment remained on hold, and the passports, all verified as legitimate, were returned to their owners.