Issue of July 26, 2020
     
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Benguet
 
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SEC makes permanent cease, desist order against CROWD1
by Press release

The Securities and Exchange Commission has made permanent its order stopping Crowd1 Asia Pacific, Inc. from soliciting and accepting investments from the public under a scheme disguised as a digital marketing business.

In a resolution issued on July 2, the SEC denied the motion to lift cease and desist order ad cautelam (with express reservation on jurisdiction) filed by Crowd1 permanently for lack of merit.

The SEC issued a cease and desist order against Crowd1 last May 12 after finding that the entity has operated “a fraudulent investment scheme consisting of the sale and/or offer of inexistent securities in the form of investment contracts to the public.”

Crowd1 has solicited and accepted investments from the public by offering what it describes as educational packages for a minimum of P6,000 and as much as P240,000.

To entice the public to invest, Crowd1 promised 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 has likewise touted a pairing incentive payable in Euros to encourage member-investors to recruit new members.

Representing itself as a digital marketing business, Crowd1 claimed that 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 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 8799 or The Securities Regulation Code (SRC).

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 the Implementing Rules and Regulations of the SRC.

Crowd1 neither secured a 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 SRC.

Crowd1 only registered as a corporation for the primary purpose of engaging in business process outsourcing services. 

The SEC emphasized 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.

It also prohibited Crowd1 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.


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