SEC orders CROWD1 to stop illegal investment scheme
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The Securities and Exchange Commission (SEC) has directed CROWD1 Asia Pacific Inc. to immediately stop its “fraudulent” investing-taking activities under a scheme disguised as a digital marketing business.
In an order issued on May 12, the SEC issued a cease and desist order (CDO) to CROWD1, under pain of contempt. This entity has been selling and/or offering for sale to the public securities in the form of investment contracts or other similar schemes without prior registration and permit to sell.
The SEC also ordered CROWD1 to stop promoting its investment scheme in social media and other online platforms.
While CROWD1 is registered as a corporation, its primary purpose is to provide business process outsourcing services. The SEC emphasized that the certificate of incorporation granted to CROWD1 explicitly prohibited the corporation from soliciting, accepting or taking investments or placements from the public as well as from issuing investment contracts.
CROWD1 has not secured any secondary license to operate as a broker/dealer, registered as issuer of mutual funds, exchange-traded funds or proprietary/ nonproprietary shares, nor registered any securities pursuant to the Securities and Regulation Code (SRC), the SEC noted.
Representing itself as a digital marketing business, CROWD1 claims it generates income from online games and facilitates the generation by its members of residual income from its affiliate gaming companies such as AFFIGLO and MIGGSTER.
The SEC, however, 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 the SRC or Republic Act No. 8799.
The SEC 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 implementing rules of the SRC.
