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October 14, 2019 Updated

The Philippines’ Securities and Exchange Commission has issued an advisory against a bitcoin investment scheme running in the country.

The basis of the information from this article is from the Commission’s website.

September 5, 2018 – The Philippines Securities and Exchange Commission (SEC) issued an advisory against AirBit Club and GO88 Ventures, Inc (called Airbit in this article). Airbit offers illegal online investments to the public. The scheme requires users to pay a subscription package. The money invested by the user, the companies claim, will be used to pay for cryptocurrency mining equipment/software and its affiliates. The scheme has victimized a number of people, who thought they are using it to double their money or have money for their retirement plan. 

bitcoin text message scam

Airbit Club Bitcoin Investment Scheme

In Airbit’s Business Model, a user signs for an AirBit Club account. He chooses a subscription package or investment packages. Each package has a different cycle, volume, and estimated total profit.

  • Volume  – points from referral credits.
  • Cycle – cloud mining contract equivalent to 75 business days
  • Total Profit Days – the number of days the account will profit.

50% of the money will be shared with affiliates. The other half will be used to acquire mining equipment to be used on trading and trading platforms.

When the user sends a specified amount of Bitcoin into their Airbit Club Bitcoin wallet, the registration is complete. This acts as payment for their subscription fee.

The user is given 3 wallets:

  1. a Cash Wallet which will reflect whatever amount of Bitcoin is sent from an external Bitcoin wallet into the Airbit Club Bitcoin wallet;
  2. Commission Wallet for commissions;
  3. Rewards Wallet for rewards.

Read More: (Updated August 2019) List of Licensed Virtual Currency Exchanges in the Philippines

How Investors Can Earn

Airbit Club offers Passive and Active Incomes:

  • Passive Income – daily rewards the user earns from every profit earned by the company through Bitcoin trading and mining.
  • Active Income – bonuses for recruiting users directly or indirectly, making it like a Ponzi Scheme.

There are multiple levels of recruits. “Pro members” can receive bonuses up to their 18th level recruits. Airbit gives binary bonuses every time the user completes the left and right side of their recruitment pyramid.

Howey Test

The Commission concluded that Airbit Club subscriptions are investment contracts. It satisfies the “Howey Test”.

  1. There is an investment of money. The SEC claims that purchases using cryptocurrency are considered an investment of “money”.
  2. There is a Common Enterprise. Investors are “investing in a common enterprise”. The profits from mining are divided among them.
  3. There is an expectation of profits. “The sole motivating force in purchasing Airbit Club subscriptions” is the promise of profits.
  4. The profit is primarily from the efforts of others. The sole responsibility of the subscriber is to pay fees in the form of Bitcoin.  The company will use it as a trading capital by the company.

Read More: Bitcoin Scams, Cryptocurrency Scams, and How to Avoid Them

Cloud Mining Contracts

The Commission concludes that Airbit Club subscriptions are cloud mining contracts. According to a previous advisory, this falls within the definition of “securities” as defined by Philippine laws. The law requires the companies to register the said security and acquire the appropriate licenses to sell them.

Notice to Agents

The SEC stated that anyone who acted as agents or salesmen of the company in selling or convincing people to invest in this Bitcoin investment scheme will be prosecuted and held criminally liable under the Securities and Regulation Code (SRC) and will be penalized with up to Php 5 million in fine or up to 21 years in prison.

Anyone who invites or recruits people in this illegal activity will be held criminally liable in accordance with the Supreme Court decision in the case of SEC vs. Oudine Santos (G.R. No. 195542, March 19, 2014).

The names of the people involved in the activity will be reported to the Bureau of Internal Revenue (BIR).

Previous Actions of the SEC

The Securities and Exchange Commission has issued similar advisories in the past with regards to illegal Bitcoin and cryptocurrency investment schemes:

Just days before, the Commission has reissued its advisory against Yeheey. Yeheey promoted on social media that the advisory against them has been “sorted out”.

  • Philippines SEC Reiterates Advisory Against Yeheey

What is the latest on Ploutos Coin Scam?

The SEC and Cryptocurrency

The Commission has issued an advisory regarding Initial Coin Offerings early this year and followed with ICO draft rules released last August 2018. Relevant companies and organizations engaged in cryptocurrency and blockchain have submitted their position papers to the agency.

This September 2018, the regulator will issue draft rules on cryptocurrency exchanges that act as trading platforms. SEC advises the public against illegal cryptocurrency investment schemes and encourages everyone to call its Corporate Governance and Finance Department (818-6103) for information on whether securities are registered or not.

This article is first published on September 5, 2018. 

Read SEC’s Advisory on their Website

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