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Advisory raised against firm over illegal investment scheme Ponzi-like scheme?

ANOTHER local company has become a subject of an advisory from the Securities and Exchange Commission (SEC) for luring investors to invest in its frozen products and grow their money even when it does not have any permit for the purpose.

In its March 21 advisory, the SEC Enforcement and Investor Protection Department stated that the Davao Prime Summit Frozen Products Trading “is not authorized to solicit investment from the public” and that it seemed it was employing a “Ponzi-like scheme.”

Although, based on its Facebook page posts, the entity had permits both from the regional office of the Department of Trade and Industry and the city government. the SEC-EIPD stated that it was not registered with the agency and did not have any legal personality to solicit investments.

The TIMES tried to seek a comment from the entity but has not received a reply.

The division pointed out that based on the online post of the entity, a person must first attend its orientation seminar at its office and avail of the investment plans which could range between P10,000 and P500,000.

Based on the range of investments, “(i)nvestors may earn up to 120% within the lock-in period of six months or 20% for every month.”

In its sample computation, a P10,000 investment would yield P2,000 in each of the first five months and P12,000 in the sixth month.

This system, the agency pointed out, constituted an “investment contract,” “a kind of security, (that) exists when there is an investment or placement of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”

This concept, it added, is “prominent in the scheme” of the entity which, under the Securities Regulation Code, requires the entity and its agents to have the appropriate registration and the license to sell to the public.

Based on the SEC database, the entity was operating “without the necessary license and/or authority to solicit, accept or take investments placements from the public nor to issue investment contracts and other forms of securities defined under Section 3 of the Securities Regulation Code.”

The scheme, it added, “has the characteristics of a `Ponzi scheme’ where money from new investors are used in paying `fake profits’ to prior investors and is designed   mainly   to   favor   its   top   recruiters   and   prior   risk   takers   and   is detrimental to subsequent members in case of scarcity of new investors.”

The scheme was named after  Charles Ponzi, an Italian swindler who used that concept to defraud investors in the US in the 1920s.

“The offering and selling of securities in the form of investment contracts using the `Ponzi  Scheme’ which is fraudulent and unsustainable, is not a  registrable security,” the advisory said, adding that such a scheme will not be approved by the agency.

The agency warned that those behind the company, including influencers and endorsers, if they continued to solicit investments, would face criminal complaints that carry P5 million in fines and up to 21 years in jail or both, dependent on the discretion of the court.


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