The Securities and Exchange Commission of the Philippines denied the motion of KROPs to lift the ban on its ICO. Intended to be an online marketplace for fresh farm produce that runs on the blockchain, KROPS gets a permanent cease-and-desist order from the SEC due to multiple violations.
KROPS and SEC
In January 2018, the SEC stops the sale of KROPS ICO. The ICO is run by Black Cell Technology which is registered in HK with an office in Manila. The company is led by Mr. Joseph Calata, whose agri-firm, Calata Corporation got delisted in the Philippine Stock Exchange in 2017.
SEC ruled that the KROPS ICO is promising a sale of securities. Securities must be registered under Philippine Laws. Mr. Calata argued it doesn’t have to do so because the company issuing the Krop Coins is based in Hong Kong.
“Krops are selling or offering securities in the form of KropTokens and/or KropCoins to the public without the necessary license from the corporate regulator, which is a violation of the Securities Regulation Code. The continued public offering and sale of Krops Tokens and/or KropCoins without the required license from the Commission makes the public offering and selling a continuing illegal act which makes it imperative and necessary that a cease and desist order be immediately issued.” – SEC
- Read more: SEC Moves to Stop Calata-Led Krops ICO
KROPS Motion to Lift the Ban
KROPS ICO was declared illegal by SEC because it hits the four elements of the *Howey Test aside from it not getting a license from the corporate regulator.
“a contract, transaction or scheme is an investment contract where a person (a) invests his money (b) in a common enterprise (c) with an expectation of profits (d) solely from the efforts of others.” – SEC v. W.J. Howey Co. (328 US 293 ), case in the US
KROPS, however, argued that they weren’t able to satisfy one of the elements of the test namely letter (d): “increase in value from the efforts of others”.
But SEC’s ruling reiterated that they made the right decision.
“Respondents admit this when they stated that: The market forces that control the value of the commodities being traded on the Krops platform may also dictate the value of the KropCoins,” – SEC Ruling
The SEC then added the following statement:
“attempting to evade an obligation to register with the Commission by claiming that the ICO is the sole act of Black Cell HK. Piercing the corporate veil is thus proper and the respondents may all be held liable,” – SEC
KROPS is an online farm produce marketplace running on the blockchain. It connects farmers to buyers and cutting the middlemen. It has a mobile app that buyers and sellers can use.
Source: Business Inquirer
- Joseph Calata’s Response on SEC’s Krop ICO Cease-and-Desist Order
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