CRACKDOWN ON ‘SCAMMERS’: SEC to probe other investment schemes in Capiz

By Felipe V. Celino 

 

ROXAS City, Capiz – The Securities and Exchange Commission (SEC) will investigate other investment schemes operating in the province of Capiz and Western Visayas after revoking the registration of Chiyuto Creative Wealth Document Facilitation Services (CCWFS) of Patrocino Chiyuto Jr.

Atty. Russel Ildesa, SEC-6 Regional Director, said in a radio interview Tuesday that his office will also probe RGS Online Marketing, Cashdrop, and other double your money investment schemes in Western Visayas.

Ildesa said that the SEC continues to gather evidence which could lead to the revocation of the registration of the said companies.

The SEC earlier issued an advisory to the public to refrain from investing in an investment scheme that offers “double your money” after 30, 60 or 90 days without production, as these are considered “too good to be true”.

The SEC also asked the public to visit its website and check the list of other investment companies that are under investigation.

On Monday, the SEC revoked the certificate of incorporation of CCWFS-OPC (One-Person Corporation) for operating an unauthorized investment program resembling a Ponzi scheme.

The SEC said CCWFS violated the Revised Corporation Code of the Philippines (RCC or Republic Act 11232) after it offered investment opportunities without a valid license.

The SEC’s Enforcement and Investor Protection Department (EIPD) also imposed penalties totaling PHP9-million against Chiyuto and its single stockholder Patrocenio Calvez Chiyuto Jr. for administrative violations of Republic Act No. 8799, or the Securities Regulation Code (SRC).

Chiyuto was permanently disqualified from being a director of other corporations.

The EIPD issued the order after finding that Chiyuto has been offering and selling securities to the public through a double-your-money roulette game without the necessary license from the Commission. This is considered an ultra vires act, prohibited under Section 44 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC).

Chiyuto’s activities further constitute serious misrepresentation as to what it can do to the great prejudice of or damage to the general public, which is a ground for the revocation of a corporation’s certificate of registration under Presidential Decree No. 902-A, according to the EIPD.

The SEC has warned the public against placing their money in Chiyuto, initially through an advisory on August 18, 2020 and an investor alert on its official Facebook page on October 23, 2020.

The Commission subsequently issued a cease-and-desist order against Chiyuto on February 1 and a show cause letter on February 2 for Chiyuto to explain why its registration as a one person corporation (OPC) should not be revoked.

Chiyuto, which initially registered as a sole proprietorship with the Department of Trade and Industry and later on as an OPC with the SEC, has offered investments to the public with promised returns of 100% in one day, 30 days or 45 days.

Under the scheme, an investor places as low as PHP1 to as much as PHP1-million, after which Chiyuto will spin the roulette to select the payout schedule. The investor is then issued a promissory note with the corresponding return and day when the guaranteed earnings could be claimed.

Chiyuto also offered a 5% referral commission and held raffles with brand new cars and motorcycles as prizes to attract more investors.

Chiyuto’s scheme involves securities, particularly an investment contract, whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others.

As a form of security, investment contracts must be registered with the SEC before they can be sold or offered within the Philippines, pursuant to Section 8 of SRC. Records of the Commission, however, showed that Chiyuto has neither registered any securities nor applied for the necessary license to offer such securities for sale.

“To make matters worse, the scheme being offered by Chiyuto bears the tell-tale signs of a Ponzi scheme where the profits or pay-outs taken from the incoming investors or additional ‘pay-ins’ shall be paid to existing or earlier members-investors,” the EIPD noted in the revocation order.

Ponzi schemes rely on the contributions of more investors to pay off the returns of earlier-stage members, rather than from the actual sale of products or services from a legitimate business.

“That Don Chiyuto could not present any specific business plan or cite a profitable enterprise to finance his money-making scheme clearly shows that the investment scheme which he and his companies foisted on the unsuspecting public was fraudulent,” the EIPD explained.

The EIPD further pointed out that Chiyuto’s paid-up capital amounted to “only a paltry PHP250,000” despite reports that its business transactions reached hundreds of millions of pesos.

“Wherefore, for violation of Section 44 of the Revised Corporation Code of the Philippines (RCC or R.A. 11232) in relation to Sections 8.1, 28.1 and 26.1 of the Securities Regulation Code, P.D. 902-A and Section 179 (j) of the RCC, the Certificate of Incorporation and the registration of Chiyuto Creative Wealth Document Facilitation Services OPC as a one person corporation is hereby revoked,” the order read.