Editing by Nath Cajuday. Written by Sheila Bertillo and Julian Barcega. Additional information by Michael Mislos
The Securities and Exchange Commission released an advisory for the public to not invest and stop investing in Lodicoins last September 29, 2022.
According to a statement, the Commission has received several reports about the unauthorized investment-taking activities of LodiCoins / Lodi Technologies Incorporated doing business under the name and style/s of LODITECH. Hence, it prompted the creation of the advisory and a thorough investigation.
LodiTech has been seen by the Commission using several social media platforms such as Facebook, Twitter, Instagram, and Discord. These platforms have been used to entice people to invest in their virtual currency called Lodicoins (LODI) through their website lodicoins.com. The startup is also operating using the said virtual currency.
The company described on its website that LODI is a utility token.
It also has a disclaimer on its whitepaper that LODI cannot and should not be considered as a share or security of any type.
But as the Commission went through its investigations, it found out that the Chief Executive Officer and Co-Founder of LodiTech hyped the virtual asset through his social media and promised a huge profit for those who will invest in it.
Citing the Commission’s finding, “Lodicoin would be listed at ten times the pre-sale or original private price, making it appear that those who will purchase the coin in the ICO will earn at least 1000% in profits.”
And several Facebook posts that the Commission gathered showed that the company entices investors with its use case that the startup offers packages with inclusions such as 54% commission. Depending on the packages purchased through its Rank Bonus scheme, it also promises cash bonuses, car, luxury watch, and travel incentives.
The SEC cited its advisory on Initial Coin Offerings and Virtual Currency. An ICO is the first sale and issuance of a new virtual currency to the public usually for the purpose of raising capital for start-up companies or funding independent projects.
The Commission also cited the US SEC in its investigative report in “The DAO” case, stating that “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.”
Based on the citations and the application of the Howey Test, the SEC concludes that the investment-taking scheme employed by Lodi Technologies Incorporated is an investment contract as it involves the offering and sale of securities to the public where their investors need not exert any effort other than to invest or place money in its scheme with the expectation of profits.
Therefore, LODI, though portrayed as a utility token, is considered a security because of its potential to provide huge profit to its investors.
As of the SEC, 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.
Accordingly, these virtual currencies and assets cannot be masked and presented as currencies when it is essentially a security in character which must be subject to registration in order to protect the investing public.
Furthermore, the SEC also verified the registration of the startup invalid because it has presented its primary purpose as a business processing outsourcing (BPO) service provider, and found that it is inconsistent with its actual business model.
In addition, the Commission concluded that LodiCoins is neither registered as a Virtual Asset Service Provider (VASP) with the Bangko Sentral ng Pilipinas (BSP) and does not have a corresponding Certificate of Authority with the BSP as a Money Service Business (MSB) required under the Guidelines for Virtual Asset Service Providers (BSP Circular No. 1108, Series of 2021).
SEC also emphasized that LodiCoins’ name does not appear among those listed as registered MSBs as of 31 March 2022 with the Anti-Money Laundering Council under the Anti-Money Laundering Act.
Hence, the government body has advised the public not to invest or stop investing in Lodicoins and Lodi Technologies Incorporated’s investment-taking scheme which operate without the necessary licenses and/or authority.
Lastly, the Commission warns all unscrupulous individuals and/or entities that strict penalties are imposed for violations of the Securities Regulation Code, the Revised Corporation Code, and such other rules and regulations enforced by the Commission:
“Those who act as salesmen, brokers, dealers or agents of such unauthorized entities like the operators of the Lodicoins in selling or convincing people to invest in their investment scheme offered including solicitations and recruitment through the internet may likewise be criminally prosecuted and penalized with a maximum fine of Five Million pesos (P5,000,000.00) or a penalty of Twenty-one (21) years of imprisonment or both pursuant to Sections 28 and 73 of the SRC.”
The names of all those involved will also be reported to the Bureau of Internal Revenue (BIR) so that the appropriate penalties and/or taxes be assessed correspondingly.
The Commission also urges the public who has any information regarding any investment solicitation activity by any individual or group of individuals that proliferate like the aforementioned illegal investment-taking schemes, to send their report to the EIPD at firstname.lastname@example.org.
Last July, boxing world champion Manny Pacquiao partnered with Lodi Technologies, the firm behind Lodicoin, to launch his namesake non-fungible token (NFT) collection, Manny Pacquiao NFT Project (MPNFT). The NFTs are priced at 0.9 ETH per mint or over ₱70,000 per NFT. The last update regarding the sale was there were only 3 minted out of 10,000 supply. The website of the project however is currently inaccessible. (Read more: Manny Pacquiao Launches Exclusive NFT Collection on Lodicoin)
Recently, the Commission also published an advisory against the entities headed by a certain Sophia Maria Andrea Ramirez Francisco for offering enticing investments including crypto trading schemes. (Read more: SEC Issues Advisory Against Sophia Francisco Holding)
The SEC also permanently ruled the operation halt on offering digital currency called AZNT Token on Astrazion Noble Task Community Foundation, Astrazion Global Holdings Philippines, Inc., and Astrazion International through a cease-and-desist order (CDO) in a resolution published last August 11, 2022. (Read more: SEC Issues Cease and Desist Order Against Astrazion Group, AZNT Token)
Following the massive adoption of cryptocurrency in the country and the ongoing exploitation of this new technology by scammers to entice investors, the Commission has been actively issuing advisories and CDOs over the past years to warn and protect the public against entities taking advantage of the hype around cryptocurrencies.
Consequently, the SEC has recently asked the Senate to draft legislation addressing these issues and loopholes within our regulations. According to them, the Commission does not have the power to control other cybercrimes that involve digital assets and was only able to shut down investment scams that are considered investment solicitations that violate the Securities Regulation Code. The Bangko Sentral ng Pilipinas (BSP) also expressed the same concerns. (Read more: SEC: Law Focusing on Digital Assets Needed)
For more information about the Advisories that the Commission issued against other entities. Go to: SEC Advisory Archives | BitPinas
This is a developing story.
This article is published on BitPinas: SEC Issues Public Advisory Against LODICOIN