Malaysia Shuts Balaji Srinivasan's Network School Even as Kazakhstan Agrees To Open Another

The order, announced on 21 Jul and taking effect on 22 Jul, followed two weeks of passport inspections and a growing public dispute between Srinivasan and Malaysian authorities.

It also marks a setback for Srinivasan's attempt to turn his crypto-inspired "network state" concept into a physical community where entrepreneurs, investors and technologists live and work together. Network School is now considering other jurisdictions for its "nodes" and has announced an agreement with Kazakhstan to establish operations.

Enforcement action

In a media statement, Malaysia's Iskandar Puteri City Council (MBIP) said inspections conducted in mid-July found Network School non-compliant with licensing and premises-use requirements at two units.

One unit was allegedly operating without a business licence and was ordered to stop operations. The adjacent unit was licensed as an administrative office but was allegedly being used for unapproved activities, prompting the council to cancel its licence.

The alleged violations even extended to the company's signage. The council said a billboard at the second unit did not match its approved application and warned that continued non-compliance could result in prosecution.

Days before the order, Srinivasan dismissed reports that the school was shutting down as "fake news," saying it had received only two notices, one over the wording on a sign and another over the licensing of a coworking space created by joining the two adjacent units, and would remedy both.

Rising tensions

In a 16 Jul post addressing Malaysian Prime Minister Anwar Ibrahim, Srinivasan asked for written assurance that Network School was "personally welcome" in Malaysia and paused a planned RM500mn ($122mn) expansion until receiving it. "If you don't want our investment, or those of our colleagues at billion-dollar funds and trillion-dollar companies, we will of course respect your wishes and reallocate our capital to other countries instead," he said.

According to local media outlet The Star, Onn Hafiz Ghazi, chief minister of Malaysia's southern state of Johor, said on 17 Jul that the licensed office had been used as classrooms and for business promotion without detailed applications, while the unlicensed unit was operating despite being owned by a local citizen.

"No investor, company or organisation can be placed above the rule of law," Onn Hafiz said, while urging federal agencies to keep investigating any potential misuse of second passports or false declarations of identity.

Today's order revokes Network School's existing business licence and requires it to cease operations at its Forest City premises from 22 Jul. Malaysian authorities have not said whether the company could apply for fresh approvals or resume operations elsewhere in the future.

Passport checks and allegations

The order followed passport checks on 15 Jul, when immigration officials reviewed the travel documents of Network School's 266 foreign members and found they were legally permitted to remain in Malaysia.

The checks were triggered by social media allegations, originating with activist groups claiming the Network was hosting Israeli nationals who allegedly entered Malaysia on second passports. Malaysia has no diplomatic relations with Israel and bars Israeli passport holders without Home Ministry approval.

The Immigration Department inspected members from 40 countries, including dual passport holders, and said all travel documents were valid, with no evidence found of Israeli nationals at the site. Prime Minister Anwar Ibrahim said any Israelis found would be deported immediately, and the department said compliance checks were ongoing.

Other jurisdictions in play

Network School signed a memorandum of understanding with Kazakhstan on 21 Jul to establish a new campus, making the country a location for the community's expansion.

Srinivasan said the campus would offer expedited visas, streamlined redomiciliation and active recruitment of international talent. The agreement follows his earlier praise for Kazakhstan's partnership with the Solana Foundation to establish a Solana Economic Zone, which he cited as an example of the legal certainty he wanted from Malaysia.

Launched in August 2024, Network School was the first large-scale physical experiment in the network state concept Srinivasan outlined in his 2022 book, "The Network State: How To Start a New Country." The project housed hundreds of residents in Forest City's special financial zone for fees starting at $1,500 a month covering food and accommodation. 

The book highlighted that such communities would, in the future, have multiple "physical nodes" where members could live and work. Srinivasan is also seeking agreements with governments in other jurisdictions to build additional "nodes". An informal "node" of the Network School community has already been formed in Batam, Indonesia. 

The Kazakhstan agreement gives residents a new formal "node" as the Malaysian project, at least for now, is at a standstill.