The Way To Connect With Direct Selling Industry

The Way To Connect With Direct Selling Industry

SEC Philippines Declares Cease And Desist Order Against Crowd1 Permanent

A permanent order has been made by The Securities and Exchange Commission (SEC) stopping CROWD1 Asia Pacific, Inc. from asking and receiving investments from the public under its scheme which is disguised as a digital marketing business. The commission issued a resolution on July 2, denying the motion to lift Cease and Desist Order Ad Cautelam filed by CROWD1 for lacking in merit. Therefore, declaring the cease and desist order permanent.

The resolution reads that a careful review of the motion to lift will show that except for its general denials, CROWD1 has failed in presenting any evidence in support of its claim that it is not engaging in the sale or offer for sale of securities in the form of investment contracts. The commission also found that they are operating “a fraudulent investment scheme consisting of the sale or offer of inexistent securities in the form of investment contracts to the public.” Describing its service as an educational package for a minimum of P6,000 and as much as P240,000, CROWD1 is offering it to public and soliciting and accepting investments from the public.

To persuade the public to invest, CROWD1 is promising five different bonuses to its investors:

1. Streamline bonus.
2. Binary Pairing bonus.
3. Fear of loss bonus.
4. Matching bonus.
5. Residual bonus.

These bonuses are provided from games and gambling apps. CROWD1 has furthermore trumpeted a pairing incentive payable in euros to encourage member-investors to recruit new members.

Now to symbolize itself as a digital marketing business, CROWD1 claims to generate its income from online games and facilities generation by its residual income members from its affiliated gaming companies such as AFFIGLO and MIGGSTER.

The SEC ruled that CROWD1’s scheme involved the sale and/or offer of securities in the form of investment contracts and, thus, required a secondary license under Republic Act No. 8799, or The Securities Regulation Code (SRC).

The Commission also ruled that the act of CROWD1 of publishing and making presentations on its investment/ business scheme through its website, Facebook, YouTube, and on-ground events, and inviting investors constituted a public offering as defined under Rule 3.1.17 of the 2015 IRR of the SRC.
Section 8 of the SRC provides that securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the SEC.

CROWD1 hasn’t obtained a secondary license to operate as a broker/dealer registered as an issuer of mutual funds, exchange-traded funds or proprietary/ nonproprietary shares, nor registered any securities pursuant to the SRC. CROWD1 only enrolled as a corporation for the major objective of engaging in business process outsourcing services.

The SEC accentuated that the certificate of incorporation granted to CROWD1 explicitly forbade the corporation from pleading for, receiving, or taking investments or placements from the public as well as from issuing investment agreements.

Therefore, the Commission has directed CROWD1 to cease and desist, under the pain of contempt, from enthralling in activities of selling and/or offering for sale securities in the configuration of investment contracts or other similar schemes without prior registration and permit to sell.

The SEC also called CROWD1 to cease from expanding its investment scheme in social media and other online platforms.

Likewise, the Commission restricted CROWD1 from transacting any business involved funds in its depository banks, and from transmitting, unloading, or disseminating in any manner all related assets for the benefit of the investors.

The cease and the order covers the following:

1. The corporation’s operators,
2. Partners
3. Directors
4. Officers
5. Salespersons
6. Agents
7. Representatives
8. Advocates
9. Conduit commodities and subsidiaries alleging and acting for and on its behalf.

In its Motion to Lift, CROWD1 in defense argues that its operations were limited to business processing, with affiliates marketing products and shares in the earnings of the organization. It also argued that the educational packages it was selling to the public were allowed since its objective is to educate the affiliates of the organization on possible wealth to be gained from marketing products and services.

The SEC, however, upheld the evidence presented by the Enforcement and Investor Protection Department (EIPD) stating CROWD1, its officers, agents, and representatives were soliciting investments by attracting people to avail of its educational packages and volunteer more investors to receive commissions.

The Commission noted: “As correctly pointed out by the EIPD, people avail of the so-called educational packages for the purpose of securing for themselves the guaranteed high yields promised by CROWD1. Thus, we agree with the EIPD that the marketing of CROWD1’s investment products is actually a public sale and/or offering of securities in the form of investment contracts. We also agree with the EIPD that CROWD1 acts as a conduit of funds. CROWD1’s allegation that it is not authorized to market nor receive payments from investors is belied by the receipts it issued to the investors which are under the name of a corporation that owns 40% of CROWD1.”

The SEC also found a violation of Section 44 of Republic Act No. 11232 or the revised corporation code of the Philippines by CROWD1’s investment taking-activities beyond the authority it was granted.

Share:

Share on facebook
Share on google
Share on twitter
Share on linkedin
Related Company

Recommended People

Related People

Related News

Register to MLMEYE
    •  
      Strength indicator
  •  
  •  

    Forgot Password

Share on facebook
Share on whatsapp
Share on google
Share on linkedin
Share on email
Share on twitter
Share on pinterest

You must be logged in to see people lisitng. You may also register for an account.

Edit Your Profile
Please login to update your profile!