Network school founder Balaji Srinivasan is seeking to sign a memorandum of understanding with Malaysia after authorities investigated his Forest City tech community over allegations that it accepted Israeli citizens using second passports.

Malaysia’s Home Ministry said on Tuesday it was investigating the Srinivasan startup community in Johor over claims that they included Israelis violating immigration laws. Initial checks found all 266 foreigners had valid documents.

Srinivasan said the agreement would provide Network School with legal certainty to continue investing in Malaysia. Without it, he said, the community could move its capital to countries that are more hospitable.

“I would like to have a document that not only states in the abstract that technology is welcome… but rather that we are welcome in person” – Srinivasan he said in a video addressed to Malaysian Prime Minister Anwar Ibrahim on Thursday.

The episode highlights the tension facing many crypto-utopias that aspire to build digital communities with their own institutions and economies, but still depend on conventional states for legal certainty.

Balaji, a former Coinbase chief technology officer, launched his online school in August 2024 in Johor’s Forest City, which is about an hour from Singapore. It is marketed as a physical community of technology creators, creators and founders.

Srinivasan did not provide details of what the deal with Malaysia might include, but suggested it could be a memorandum of understanding or a modification of the special economic zone provision.

Related: Balaji calls for more “cryptography tools” to be provided to refugees amid tensions in the Middle East

“If not, we’ll happily go somewhere else because I don’t want to be somewhere we’re not welcome,” he said.

Srinivasan also announced that he is suspending all further investments in Malaysia, including a $122 million community expansion plan, until he has “reasonable assurance” that such problems will not recur.

The Instagram post led to an immigration investigation

Claims that the network school sheltered Israeli citizens originated on social media post on Friday by activist group “Malaysian Protest 4 Palestine”, which accused the school of becoming a “meeting place for Israeli entrepreneurs”.

Israeli passport holders are prohibited from entering Malaysia, a Muslim-majority country, without written permission from the Malaysian Ministry of Home Affairs because Malaysia does not recognize Israel and does not maintain any diplomatic relations with the country.

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