Philippines SEC Warns Against Unregistered Crypto Schemes

News, Regulation | April 19, 2018 By:

The Philippines Securities and Exchange Commission (SEC) has warned the public against investing in 14 new unregistered cryptocurrency schemes.

Based on an investigation conducted by the SEC, the following entities are either using fiat money or cryptocurrencies to solicit investments but are not registered with the regulator: NewG, Smart Capital, Gener8X, Paid2Prosper, Coins and Mining Trading, PSOPOWER Apps, TradeConnec, IronTrading, ExpertTrading, OneCash, Lucky Coins, Miner’s Investment Group, Digital Coin Trading and All Pal for All Seasons.

The regulator said these companies offer their investment contracts in their corresponding Facebook pages or secret Facebook groups and chatrooms, offering unrealistic return on investments ranging from 10% to 200% per month. The companies require investors to pay their initial investments by depositing their money to a specific bank account, Coins.Ph account, GCash, or through other modes, and usually claim that they invest their funds in bitcoin and other cryptocurrencies to demonstrate their earning capacity.

The SEC said such investment schemes, whether with the use of fiat money or cryptocurrencies, are considered as securities subject to the regulatory authority of the agency. The recruitment of investor members under the guise of sponsoring a person into the system is likewise considered a form of investment solicitation or a sale of securities. The offering or sale of securities to the public without a permit or license from the commission is a violation of Section 8.1 of the Securities Regulation Code (SRC).

Any person that acts as a salesperson, broker or dealer for these unregistered investment entities may be prosecuted and penalized with maximum fine of five million pesos ($277,000 USD) or imprisonment of 21 years or both. Accordingly, those who invite or recruit other people to join or invest in this venture or offer investment contracts or securities to the public may be held criminally liable or accordingly sanctioned or penalized.

“The public is hereby warned that such investment schemes, whether with the use of money or cryptocurrencies, are considered as securities subject to the regulatory authority of this Commission,” the regulator said. “The recruitment of investor members under the guise of sponsoring a person into the system is likewise considered a form of investment solicitation or a sale of securities. The offering or sale of securities to the public without a permit or license from the Commission is a violation of Section 8.1 of the Securities Regulation Code (SRC).”

The warning came after the Philippine National Police (PNP) arrested the operators of NewG, a pyramiding scam disguised as a bitcoin investment. NewG allegedly amassed wealth worth nearly P1 billion ($19M USD) through bitcoin.

The arrest prompted opposition senator Leila M. De Lima to urged her fellow senators to push for the swift passage of her bill, which proposes to raise penalties for crypto crimes to one degree higher than what is provided for by the Revised Penal Code.