1UP fraud prompts quick SEC CDO
Law is clear on the point that a cease and desist order may be issued by the SEC motu proprio, even without a verified complaint from an aggrieved party
Daily TribuneLaw is clear on the point that a cease and desist order may be issued by the SEC motu proprio, even without a verified complaint from an aggrieved party
The Securities and Exchange Commission, or SEC, said it had to act quickly in ordering, last 5 December, a halt in the operations of Superbreakthrough Enterprises Corp. to curtail fraud or grave or irreparable injury to investors.
In an en bank decision, signed by SEC chairperson Emilio Aquino, Commissioners Javey Paul Francisco, Kelvin Lester Lee, Karlo Bello, and McJill Bryant Fernandez, Superbreakthrough Enterprises, which has been doing business under the name 1UP Time, was directed to immediately cease and desist from further engaging in the unlawful solicitation, offer, and/or sale of securities in the form of investment contracts without the necessary license from the SEC.
Aquino said the law is clear on the point that a cease and desist order may be issued by the SEC motu proprio, even without a verified complaint from an aggrieved party.
"A prior hearing is also not required whenever the Commission finds it appropriate to issue a cease and desist order. There is good reason for this provision, as any delay in the restraint of acts that yield such results can only generate further injury to the public that the SEC is obliged to protect," according to Aquino.
In a related development, Senator Raffy Tulfo's group said yesterday that the lawmaker will issue a statement when he returns home from abroad, regarding his being the 1UP brand ambassador.
The SEC also prohibited 1UP from transacting any business involving funds in its depository banks, and from transferring, disposing, or conveying any related assets to ensure the preservation of the assets of its investors.
The company was likewise ordered to cease its internet presence relating to its investment scheme.
The act of selling unregistered securities would necessarily operate as a fraud on investors as it deceives the investing public by making it appear that respondents have the authority to deal with such securities, the SEC decision explained.
It cited section 8.1 of the Securities Regulation Code clearly stated that securities shall not be sold or offered for sale or distribution within the Philippines "without a registration statement duly filed with and approved by the SEC and that before such sale, information on the securities, in such form and with such substance as the SEC may prescribe, shall be made available to each prospective buyer."
SEC indicated that the operations of 1UP were unearthed during the probe on Alphanetworld Corp. president Juluis Allan Nolasco's activities after the agency issued a CDO on Alphanetworld or NWorld.
On 9 July 2015, Nolasco incorporated NWorld and served as its chairperson, president and main promoter.
On 23 February 2022, the CDO against NWorld, its directors and officers which included Nolasco, was issued.
SEC issued a finding that NWorld is engaged in the unauthorized sale or offer of securities without a license.
Subsequently, the SEC said NWorld's certificate of incorporation was fraudulently procured.
SEC continued monitoring the activities of NWorld and Nolasco to ascertain, among others, that they are complying with the CDO and are no longer carrying out any activity under the name of the corporation.
In the SEC investigation, it found the operations and the unauthorized investment-taking activities of 1UP which was being run by Nolasco, while his name did not appear in the incorporation documents.
SEC's Enforcement and Investor Protection Department, or EIPD, also found that aside from sharing the same business address at 1008 Quezon Avenue, Barangay Paligsahan, Quezon City, both NWorld and 1UP carry, distribute and offer the same products and packages.
On 20 December 2022, the EIPD issued a show cause order directing 1UP to explain why its certificate of incorporation should not be revoked according to Section 6 (i) (2) of Presidential Decree 902-A for serious misrepresentation as to what it can do or is doing to the great prejudice of or damage to the public.
Further, it was also directed to explain why no administrative sanctions should be imposed against it and its directors and officers for violation of
Evading long arm of SEC
Section 8.1 of the Securities Regulation Code, or SRC, and its Implementing Rules and Regulations.
In support of its allegation that 1UP is engaged in the sale and offer of unregistered securities, the EIPD submitted the certifications issued by the commission's Corporate Governance and Finance Department, the Markets and Securities Regulation Department and Company Registration and Monitoring Department which all attested to the fact that based on their respective records, 1UP has not been issued a secondary license to sell and offer securities and that it does not have any pending application for a secondary license.
The EIPD issued an order on 18 April 2023, the EIPD issued an order revoking the certificate of incorporation of 1UP based on a finding that 1UP violated section 44 of the Revised Corporation Code 12 concerning sections 5.1 (m), 8.1, 28.1 and 26.3 of the SRC, section 6 (i) (2) of 902- A, and section 179 (j) of the RCC.
1UP then appealed the revocation order via the commission en banc.
On 8 November 2023, the EIPD conducted a surveillance and ocular inspection of 1UP's new office at GF-05 & MF-05, Hexagon Corporate Center, 1471 Quezon Ave., Quezon City, after it received reports that the entity continues to sell and offer securities to the public.
The SEC investigation team found and confirmed that 1UP continues to sell to the public the investment packages.
The pieces of evidence included different kinds of bonuses that go with the investment.
