Spotting Investment Scams in the Philippines

“How would I know if it’s an investment scam?”

It is a question we tend to forget whenever we are approached with opportunities in life. 

About two months ago, a client called and said “Attorney, I need your help. I have been involved in an investment scam. What should I do? I lost all my savings.”

Let’s name my client, Anna.

When I heard her say this and as I felt panic in her words, my immediate thought was… “Oh my. Is she the victim? I hope the amount is not too big; or that it doesn’t involve a troop or a battalion that it would be too difficult to solve or for me to help her.”

My client continued and said she invested more than two hundred thousand pesos (PHP200,000.00) in the hopes of earning up to triple the amount as promised her. But she lost all of it. All the savings she had been setting aside after months and years of working as a freelancer.

Even more tragic is that she had little to no knowledge on who her perpetrators were. They were all using fictitious names. She hadn’t seen them, neither had she talked to any of them in person. All the transactions were in social media and in a mobile application which she could no longer access.

Just like a bubble, her hard-earned savings suddenly popped somewhere in her phone or on the internet and she doesn’t know if she can do anything about it.

The company she invested in claimed to be an advertising agency that gives its prospective investors an opportunity to earn passive income by availing their “engines” through a mobile application. It offers free registration and with a minimum amount of only P1,337.00 as initial investment.

My client was promised returns of up to P4,500.00 per minimum investment made, depending on the “engine” availed of.  Other than the promise of big profits, the investor can also earn commissions from the number of “new users” invited or recruited into the platform.

After we talked, I researched on the company and found that it was not registered with the Securities and Exchange Commission (SEC). It also did not have the license to offer or sell securities to the public. We immediately filed a complaint before the National Bureau of Investigation (NBI) and are now in cooperation with the local PNP-Anti-Cybercrime Group in gathering more information for the complaint we are preparing to file before the Department of Justice.

Applying  the Howey   Test, the  investment-taking  schemes  employed by the company have the characteristics of an “investment contract” as they involve the offering and sale of securities to the public where their investors need not exert any effort other than to invest or place money in the scheme with a reasonable expectation of profit.

Those who act as salesmen, brokers, dealers or agents of such unauthorized entities selling or  convincing people  to  invest  in  their  illegal  investment  scheme  including  solicitations  and recruitment through the internet may likewise be criminally prosecuted and penalized with a maximum fine of Five Million pesos (P5,000,000.00) or a penalty of Twenty-one (21) years of imprisonment or both pursuant to Sections 28 and 73 of the SRC.

GOVERNTMENT COMBAT AGAINST INVESTMENT SCAM ENTITIES AND INDIVIDUALS

Earlier this year, SEC took down “Decentra”, another investment scam company promising fast and guaranteed returns from cryptocurrencies in an entrapment operation. It resulted to the arrest of 19 individuals last June 11, 2022. SEC – Enforcement and Investor Protection Department (EIPD) with the Philippine National Police Anti-Cybercrime Group (PNP-ACG) arrested the officers of Decentra while in the act of soliciting investments from the public without the required license during a seminar or business presentation in a hotel in Quezon City.

The commission continues to combat the spread of investment scams in the country by actively going after perpetrators of unauthorized investment schemes and implementing investor education programs to improve financial literacy.

As of June 15, 2022, SEC had already issued 55 advisories against groups and individuals found to be soliciting investments from the public without the necessary license from the commission. It had also secured 18 convictions against 20 individuals meted with a total imprisonment of 572 years and a total fine of PHP25 million.
(See the full article at https://www.pna.gov.ph/articles/1176762 )

The battle against the spread of investment scams in the country is running uphill as there is still a rise of fraudulent investment companies and number of swindlers, both international and locally. We can protect and prevent ourselves from becoming victims to these unlawful schemes by educating ourselves and asking the right questions before we make that initial investment!

WHAT ARE RED FLAGS INVESTMENT SCAMS?

Before you invest your hard-earned income into something you hope to buy you your early ticket for retirement, you might want to ask yourself the following questions:

• “Is the company not registered and licensed to offer and/or sell securities with the Securities and Exchange Commission (SEC)?”
• “Are you promised with “NO RISK” but with “HIGH RETURNS”?”
• “Do you feel like you have no knowledge on what exactly you are investing in?”
• “Does it focus on recruitment and not on the product being offered?”
• “Are you being pressured to spend right away and invest your money immediately, after the offer is made?”

If the offer sounds too good to be true and the answer to all these questions are “YES” – then it is most likely a scam and it is best for you to stay away from it. Put your money back inside your pocket and use it some other time for a better investment opportunity somewhere else.

It’s Christmas soon and the holidays are overflowing the streets, restaurants, and hotels with busy Filipinos preparing for and celebrating to what they hope to be their best and most joyous celebrations since after the two-year halt on gatherings because of COVID-19. Other than the cheerful celebrations, it is also the best time for us to educate ourselves on the investment vehicles available to ensure that we invest our hard-earned money and savings wisely. In the hopes of earning passive income and securing our future, let us always see to it to check the legalities of the investments being offered to protect ourselves and our families from being victims to these rampant unlawful schemes.

To check whether the company offering an investment opportunity is registered with SEC, you may:

(1) visit the official website of the commission through www.sec.gov.ph and

(2) search for the company name in the search engine.

Happy holidays!