The Philippines’ Securities and Exchange Commission (SEC) has issued a warning against Lodi Coins, a digital asset project that promised investors 10x gains.
The SEC flagged the public offering of Lodi Coins by Lodi Technologies Inc., claiming that the company violated securities laws by offering unregistered securities.
“Lodi Coins is not registered as a virtual asset service provider with the Bangko Sentral ng Pilipinas (BSP). Lodi Technologies also did not have the corresponding certificate of authority from the central bank as a money service business (MSB), as required under the BSP guidelines for virtual asset providers,” the notice stated.
The watchdog claims that Lodi Technologies has been offering the token through Facebook, Twitter, Instagram, and other social media platforms. Investment packages in the token’s initial coin offering (ICO) ranged from $200 to over $8,500. The issuers told investors that they stood to make 10x in profits after the ICO.
To evade regulatory scrutiny, Lodi Technologies marketed Lodi Coins as utility tokens, telling investors that this exempted them from being labeled as securities.
However, the regulator pointed out that this didn’t influence its decision in the slightest. Citing a decision made by its United States counterpart, the Gary Gensler-led SEC, the watchdog stated, “Securities law may apply to various activities, including distributed ledger technology, depending on particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale.”
In this particular case, Lodi Coins were deemed a security because investors pooled their money into a common enterprise and were led to expect profits primarily from the efforts of others.
“In other words, merely calling a token a ‘utility’ token or structuring it to provide some utility does not prevent the token from being a security. Tokens and offerings that incorporate features and marketing efforts that emphasize the potential for profits based on the entrepreneurial or managerial efforts of others contain the hallmarks of a security,” the SEC noted.
Filipinos must not invest in Lodi Coins, the regulator concluded. Furthermore, salesmen, brokers, and agents for the company, including those doing recruitment over the Internet, may be criminally prosecuted and face up to PHP5 million ($85,000) or a maximum of 21 years in prison.
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