CEZA Orders Investigation of Alleged Investment Scam Involving an Offshore Virtual Exchange Licensee

September 17, 2019 – The Philippines’ Cagayan Economic Zone Authority (CEZA) chief Raul Lambino ordered a thorough investigation of a reported investment scam allegedly being operated by an offshore virtual currency exchange licensee of the government corporation.

Background

Government agents led by the Bureau of Immigration (BI) raided Grapefruit Services Inc. offices on the suspicion of operating an online cryptocurrency investment scam.

Grapefruit, located on the 37th floor of One Corporate Center in Ortigas Center, Pasig City was raided by the BI’s fugitive search unit, together with the Presidential Anti-Corruption Commission, and the Philippine National Police’s Integrity Monitoring and Enforcement Group. Local Broadsheet Media Inquirer reported that they were accompanied by representatives from the Chinese Ministry of Public Security.

It was actually a tip from the Chinese government that enabled the raid. Inquirer noted that Grapefruit is an authorized service provider of Golden Millenial Quickpay Inc. Ltd, one of the offshore cryptocurrency company licensed by the Cagayan Economic Zone Authority (CEZA). As a CEZA locator, Grapefruit should be operating in Cagayan, but the arrest in their office in Ortigas suggest it is operating outside the ecozone’s jurisdiction. The arrested employees all had CEZA visas, meaning they should be working within the economic zone in Cagayan. Grapefruit also has registration documents from the Securities and Exchange Commission (SEC) which prohibits it from engaging in securities broker or dealer activities, effectively barring it from operating fiat money or virtual currency exchange.

CEZA’s Response

Today, CEZA released a statement by Sec. Raul Lambino ordering the investigation of the reported investment scam while also revealing more details of the actions it took even before the Inquirer report was published.

As per CEZA’s website, CEZA already suspended the licenses of Golden Millenial Quickpay Inc. Ltd (GMQ) and its related licensees including that of Grapefruite Service Inc. on September 12, 2019, “pending a full investigation by all appropriate law and regulatory enforcement agencies, including the internal investigations by CEZA as the licensing authority.”

While CEZA is certain that no single Filipino was victimized of the scam, it does not allow the licensees to conduct such business activities.

“CEZA is certain that there is no single Filipino citizen who was defrauded by this alleged “investment scam” which uses platforms for offshore operations that allegedly victimized some Chinese citizens.

Likewise, CEZA does not allow its licensees to conduct business activities or offshore virtual currency exchanges in any foreign country like China that prohibits such business activity.”

CEZA said any violation is grounds for automatic cancellation of the licenses as well as the filing of legal actions against the licensees. It also said that as early as the first week of September 2019, the government corporation already “issued directives to all of its licensees for complete reports of legal, regulatory, and ethical compliance practices and standards—specifically to those operating offshore virtual currency exchanges.”

CEZA further said:

“These reports are under review at this time and will form basis for further internal investigation should any deficiencies be uncovered. Any and all violations of legal, regulatory, or ethical compliance will be subject to all applicable sanctions under CEZA rules and Philippine law.”

ABS-CBN Report

Report from broadcast media ABS-CBN News said that CEZA ordered the temporary suspension of its virtual currency exchange licensees pending their move to Cagayan, its spokesperson said Tuesday. As per the article:

“Golden Millennial Quickpay, Liannet Technology Ltd and Asia Premier operate in Metro Manila, CEZA said. Their operations will be suspended until they transfer to Cagayan for “due diligence,” CEZA spokesperson and Fintech and Cryptocurrency business officer Mike David said.” – ABS-CBN Report

CEZA spokesperson Atty. Mike David also confirmed to ABS-CBN:

Golden Millennial Quickpay, whose service provider is allegedly engaged in a cryptocurrency investment scam, faces a 90-day suspension and may even lose its license if wrongdoings are confirmed by investigators, David said.

In another ABS-CBN report, Sec. Lambino said: