SEC’s Cease-and-Desist Order vs Astrazion Group Now Permanent
In Astrazion’s motion to lift the CDO, they said the sale of the tokens to non-members did not constitute sale of investment contracts.
Editing by Nath Cajuday
Through a cease-and-desist order (CDO), the Securities and Exchange Commission (SEC) has permanently ruled the operation halt on offering digital currency to the public of the Astrazion Noble Task Community Foundation, Astrazion Global Holdings Philippines, Inc., and Astrazion International.
In a resolution dated August 11, 2022—which also served the CDO, the Commission en Banc denied the motion filed by Astrazion Foundation and Astrazion Holdings for the lifting of the order that was priorly issued last May.
The order was sent due to the finding that the group has operated an online multi-level marketing platform where it actively promoted the sale of its digital currency called AZNT Token that costs10 cents per token. (Read more: SEC Issues Cease and Desist Order Against Astrazion Group, AZNT Token)
According to the SEC, the Astrazion group enticed investors through their seven packages that guaranteed returns of 3% per day. To compute, even the starter package, which is worth $100, promises $300 in 100 days, while the double platinum package guarantees a hefty $30,000 within the same period with an initial investment of $10,000.
Moreover, while taking advantage of the growing popularity of crypto in the country, the group further lured the public by assuring them that the AZNT Tokens would be registered and listed as a cryptocurrency at Coin Market Cap, and would be traded in the crypto exchange Binance. According to them, the value of the token could surge to $10 from its current price of 10 cents.
In addition to the supposed potential value surge of their token, the Astrazion Group also promised investors a residual income and direct referral income distribution. Payouts were supposed to be released through the homegrown crypto wallet Coins.ph.
Accordingly, the Commission noted that their scheme involved the sale and offer of securities to the public in the form of investment contracts, whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others.
As per the Section 8 of Republic Act No. 8799, or The Securities Regulation Code (SRC), securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the SEC.
“The law considers investment contract[s] as securities because what the purported issuer is, or will be using to further his business is money put in by the public who expects a return of their investment,” the Commission En Banc said.
On the other hand, in Astrazion’s motion to lift the CDO, the entitity reasoned that the sale of the tokens to non-members did not constitute sale of investment contracts because the scheme was decentralized and did not rely primarily on the efforts of others to earn a profit.
They also stressed that the AZNT Tokens could not be considered as securities under the purview of the SRC because they were functional and not speculative in the sense that they were intended to be used, in the future, for payment of good and services.
The Commission En Banc, however, dismissed the arguments as the “law considers investment contract[s] as securities because what the purported issuer is, or will be using to further his business is money put in by the public who expects a return of their investment.”
“From this perspective, and in the rule on the liberal construction of the concept of securities, the term investment contract should include and cover all forms and varieties thereof which are known or considered, or ought to be known or considered to be such, in the financial world,” it added.
Although the Astrazion Global and Astrazion Foundation were duly registered corporations with the Commission, the entities never secured a secondary license from the SEC as an issuer of securities or broker dealer nor registered any securities for public offering pursuant to the SRC. On the other hand, Astrazion International was not even registered with the SEC as a corporation or partnership.
Prior to this, the SEC already issued an advisory against the Astrazion Group as early as February 3, 2022, in order to warn the public against investing in the group and similar entities.
Last month, in a recently concluded session of the Senate’s Committee on Banks, Financial Institutions, and Currencies, the SEC asked the legislation for more profound laws regarding digital assets as the Commission can only shut down investment scams that are considered as investment solicitations that violate the Securities Regulation Code and they do not have the appropriate power to control other cybercrimes involving digital assets. (Read more: SEC: Law Focusing on Digital Assets Needed)
The Commission has been actively issuing advisories and CDOs over the past years to warn and protect the investment public against entities taking advantage of the hype around cryptocurrencies.
Accordingly, the Commission answered the letter from the Infrastructure think tank Infrawatch regarding its letter to the regulator, asking it to investigate crypto exchange giant Binance because it is operating in the Philippines without proper registration. The SEC then cautioned the public not to invest with the exchange. (Read more: SEC Responds to Infrawatch: Binance is Not Registered, Cautions Public Not to Invest)
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