Tech 12 April 2018Cecille de Jesus
Unregistered cloud mining operators face up to 21 years’ prison time, Philippine SEC warns
Even recruiters will not be spared from prosecution, SEC says.
Amid the rising number of businesses—both legitimate and dubious—in the cryptocurrency space, cloud mining operators have triggered alarm bells and are now on the Philippine Securities and Exchange Commission’s (SEC) radar.
In a release, the SEC has issued a warning to unregistered cloud mining operators—including their agents.
“The Commission has detected that certain individuals or groups of persons are enticing the public, through a popular social media platform or in their own independent websites, to invest in so-called cloud mining contracts,” the SEC wrote on their website. The warning mentions both local and foreign firms who solicit investors from the Philippines.
According to the SEC, such contracts can be classified as securities, and will therefore be subject to securities laws—they have to be registered and those soliciting these investments required to be licensed to operate.
“Applying the Howey Test as discussed by the Honorable Supreme Court in Power Homes Unlimited vs. SEC (G.R. No. 164182, February 26, 2008), a cloud mining contract is an investment contract falling within the purview of the term “securities” as defined by law,” the warning stressed.
The SEC explains that the activity ticks all the check boxes for securities: there is the requirement of investment money, the collected investment money is pooled to purchase mining equipment for profit, there is expectation of profit, and the distributed profits are generated from others people’s (cloud mining operators) efforts.
The SEC warns that violators can be prosecuted, and that even agents promoting such activities and recruiting others to engage in these activities are not exempt from prosecution.
“Likewise, those who act as salesmen, brokers, dealers or agents of these companies in selling or convincing people to invest in the investment scheme being offered by these cryptocurrency mining companies including solicitations and recruitment through the internet without the necessary license or authority from the Commission may likewise be prosecuted and held criminally liable under Section 28 of the Securities Regulation Code and penalized with a maximum penalty of twenty-one (21) years of imprisonment or both pursuant to Section 73 of the SRC.”
The SEC ultimately discourages people from investing in activities by unregistered entities. At a time when it’s easy to fake websites and profiles, get-rich-quick schemes and cons have become rampant. Several websites have instigated scams, collecting money from ill-informed “investors” and disappearing shortly after.
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