Why Brainstorm? This is my first foray into writing an opinion column in a newspaper although I have often given my unsolicited thoughts on one topic, or another, in my Facebook profile. When I finally decided to give it a try, upon the very quick prodding of Mindanao Times editor-in-chief, Amy Cabusao, I thought about what to call the column and I remembered that in the mid-1980’s, Atty. Jesus “Jess” Dureza, whom I fondly call “Papa Jess” since I consider him as my second father, and who, along with my own dad, the late Atty. Cesar S. Europa, has been foremost in inspiring me to becoming a lawyer, had a newspaper column called BRAINSTORM, that was written with incisive wit and humorous insights on topics of the day. It was so popular that it later became a local television program.
So I thought, why not use it as something to build on and I asked Ma’am Amy to check if her publisher (I did not want to ask him directly) will consent to it and, when he did, I said I’ll call it “BRAINSTORM…. The Next Generation” and there you have it.
GOVT. VS. KAPA, AND THE LOWDOWN ON CRYPTOCURRENCY, FOREX, ETC…… On to the hot topic of the day, the government crackdown on Kapa Community Ministry, Inc. (Kapa) and similar “investment offerings” vis a vis the arguments against it.
Last Saturday, June 8, 2019, amid the growing debates in social media about Kapa and similar “high-yield” so-called investment schemes, President Duterte himself, in a live tv appearance on Pastor Apollo Quiboloy’s program, ordered law enforcement agencies to shut down these businesses and it caused a huge uproar on social media from both, those supporting these schemes as well as those against it. Pastor Quiboloy got a lot of flak from it and became the subject of derisive memes and posts.
What is really the lowdown on the issues relating to this?
First, what is the role of the Securities and Exchange Commission (SEC) and what is its authority to meddle with these schemes? While popularly known as the approving authority for setting up corporations, the bigger role of the SEC, from its name alone, is the regulation of SECURITIES and the TRADING, or exchange, thereof. Among others, it enforces the Securities Regulation Code (SRC)
What do securities have to do with it? Stated simply, under the SRC, any document evidencing any ownership or interest in a business, investment, venture or any commercial enterprise can be called a “security.” So, in schemes offering a return on investment, the documents covering it are considered securities and the law requires that businesses offering such schemes MUST have a license to do so from the SEC, otherwise it would be illegal and the people dealing in such securities, including those recruiting and marketing, can be criminally liable under the SRC. Why, you may ask? This is precisely so that the SEC can evaluate such businesses BEFORE they can do business in order to protect the public from SCAMS.
Second, what is pyramiding, and why is it bad? A pyramiding scheme exists when the yields, or profits, paid to earlier investors are taken, not from a business, but from the investment payments made by later investors. There will be a need to recruit for more and more new investors to keep paying the older ones. Just like a pyramid, the base MUST get bigger and bigger for it to continue. It is bad because, in reality, THERE IS NO BUSINESS, NO CREATION OF GOODS, NO SERVICE PROVIDED, NO ADDED VALUE. Simply put, it is robbing Pedro, Paolo and Juan to pay Jose. If it is not stopped early on there will be more and more Pedros, Paolos and Juans until the market is saturated and less and less people can be recruited to invest and the entire pyramid will collapse and those thousands, even millions, of people at the bottom will be the ones to bear the brunt of the collapse. They will be the victims who will lose their money.
Third, some say that these companies are investing in cryptocurrency, forex and other businesses which is why they can afford to give such high returns. This is pure BS, forgive the French. Notorious pyramiding scams will, of course, lead you to believe that they are making UNBELIEVABLE AMOUNTS OF MONEY from some obscure high-risk high yield business. Bernard Madoff actually “made off” with BILLIONS of DOLLARS because he used his well-established market making and securities firm to make people believe that he was investing their money in securities when he was just actually running a pyramiding scheme which blew up when a large group of investors demanded all their money back. Mr. Madoff is now serving a 150 year sentence and the losses he caused other people is still being felt after so many years.
I have read some VERY WELL WRITTEN explanations, with very hifalutin words, on how cryptocurrency trading can have such large returns with grand examples like the claim that this business is so good that even Singapore is considering issuing its own cryptocurrency and that China is following suit.
I did some checking and I found out that, in fact, the Monetary Authority of Singapore has released an official advisory warning that this news that a firm has been appointed to market Singapore’s cryptocurrency is a SCAM. You can check it for yourself on http://www.mas.gov.sg/News-and-Publications/Media-Releases/2019/Warning-on-Fraudulent-Websites-Soliciting-Cryptocurrency-Investments.aspx
The news about China is even funnier because for those who know about Bitcoin’s history, it was actually China’s ban on trading of cryptocurrency in their local exchanges that caused a huge decline in Bitcoin value in 2017. In fact, in a renewed clampdown, the Chinese government has announced that it plans to ban cryptocurrency mining in China altogether. Again this can be verified on the Bloomberg website., https://www.bloomberg.com/news/articles/2019-04-09/china-plans-to-ban-cryptocurrency-mining-in-renewed-clampdown.
So, can you make money from cryptocurrency trading? Yes, but not at the rates of return these groups are claiming because just like forex trading, money is made from the differences in the fluctuation of prices. If you can buy low and sell high, then you make money but, except for rare drastic changes, fluctuations are small and cannot sustain the high yields being promised.
Truth to tell, if the kind of returns they are claiming are true, then our big business tycoons like the Sy family of SM, the Ayalas, Gokongweis, and others would have been all over it and would have poured their fortunes into it
So, what is the bottomline?
If these investment groups can JUSTIFY, with credible evidence and financial records, that they can actually make enough money from their claimed businesses to make good on their promised high yield returns, they simply need to convince the SEC so that they can get the proper licenses.
Otherwise, what they are doing is illegal and will be stopped by the government.
Scams are real, this is not just conjecture. We have seen it happen before with the likes of the Legacy scam and the Amman Futures scam and the government must protect us from it.
The government is NOT being ANTI-POOR, it is being ANTI-SCAM to protect the public.