SEC orders CROWD1 to stop soliciting investments
The Securities and Exchange Commission (SEC) has directed Crowd1 Asia Pacific Inc. to immediately stop its alleged fraudulent investment-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 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.Crowd1 was likewise prohibited from transacting any business involving funds in its depository banks, and from transferring, disposing or conveying in any manner all related assets for the benefit of the investors.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 or dealer, registered as issuer of mutual funds, exchange-traded funds or proprietary or nonproprietary shares, nor registered any securities pursuant to the Securities and Regulation Code (SRC), the SEC noted.The CDO covers the corporation’s operators, partners, directors, officers, salespersons, agents, representatives, promoters and all persons, conduit entities and subsidiaries claiming and acting for and on its behalf.To entice the public to invest, Crowd1 promises member-investors five different bonuses: streamline bonus, binary pairing bonus, fear-of-loss bonus, matching bonus and residual bonus from games and gambling apps.Crowd1 likewise touts a pairing incentive payable in euros to encourage member-investors to recruit new members.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 AffilGO and Miggster.
The SEC, however, ruled that Crowd1’s scheme involved the sale or offer of securities in the form of investment contracts and required a secondary license under the SRC or Republic Act No. 8799.
An investment contract is presumed to exist when a person seeks to use the money or property of other persons on the promise of profits. Also, a common enterprise is deemed created when two or more investors pool their resources even if the promoter receives nothing more than a broker’s commission.The SEC also ruled that the act of Crowd1 of publishing and making presentations on its investment or 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.—Doris Dumlao-Abadilla INQ
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