The Securities and Exchange Commission (SEC) has revoked the certificate of incorporation of Chiyuto Creative Wealth Documentation Facilitation Services for operating an unauthorized investment program resembling a Ponzi scheme.
In its order issued on February 15, the SEC Enforcement and Investor Protection Department (EIPD) also imposed penalties worth P9 million against Chiyuto and its single stockholder Patrocenio Calvez Chiyuto Jr. for administrative violations of Republic Act No. 8799, or the Securities Regulation Code (SRC).
The 30-page order was signed by lawyer Oliver Leonardo, officer-in-charge of SEC’s EIPD.
Moreover, Chiyuto was permanently disqualified from being a director of other corporations, the SEC order said.
The EIPD issued the order after finding that Chiyuto has been offering and selling securities to the public through a double-your-money roulette game without the necessary license from the commission.
SEC said the scheme violated Section 44 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC).
Chiyuto’s activities further constitute serious misrepresentation as to what it can do to the great prejudice of or damage to the general public, which is a ground for the revocation of a corporation’s certificate of registration under Presidential Decree No. 902-A, according to the EIPD.
STOP INVESTMENT SCHEME
In a separate order issued on February 1, SEC directed Chiyuto, which registered as a sole proprietorship and later on as a one-person corporation (OPC), to cease and desist, under pain of contempt, from selling and/or offering securities in the form of investment contracts until it has filed and secured the necessary license.
The SEC further enjoined Chiyuto and Creative Wealth OPC from transacting business involving funds in its depository banks and from transferring, disposing, or conveying any related assets to ensure the preservation of the assets for the benefit of affected investors.
The order covers Chiyuto’s owner, principal, proprietor and sole stockholder-director- president Patrocenio Chiyuto Jr., nominee Judy Pajarillo and alternate nominee Felomina Andrada.
The order also extends to other officers, representatives, salesmen, solicitors, agents, uplines, enablers and influencers.
According to SEC, Chiyuto has offered investments to the public with promised returns of 100 percent in one day, 30 days, or 45 days, depending on the outcome of the roulette, without securing a secondary license.
Under the scheme, an investor places as low as P1 to as much as P1 million. Chiyuto will then spin the roulette to select the payout schedule and issue a promissory note to the investor with the corresponding return and day when the guaranteed earnings could be claimed, SEC said.
Also, Chiyuto has offered a 5 percent referral commission and held raffles with brand new cars and motorcycles as prizes to attract more investors, it added.
“The scheme involves 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,” SEC said.
Section 8 of RA 8799, or The Securities Regulation Code (SRC), provides that 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.
“Clearly, Creative Wealth OPC’s members were lured to invest their money, not for an existing legitimate business enterprise but simply because they are guaranteed a 100% return of the same within a definite period,” the order read.
It added, “the act of Creative Wealth OPC and Chiyuto in selling/offering unregistered securities operates as a fraud to the public which, if unrestrained, will likely cause grave or irreparable injury or prejudice to the investing public.”
The SEC emphasized that the certificate of registration granted to Chiyuto explicitly prohibited it from soliciting, accepting, or taking investments or placements from the public, as well as issuing investment contracts, without securing a secondary license.
On February 2, the SEC EIPD directed Chiyuto to show cause why its certificate of registration should not be revoked and no administrative sanctions should be imposed against it and its directors, officers and nominees.
SEC had already warned the public against investing in Chiyuto and other entities engaged in unauthorized investment-taking activities in August 2020, and that it issued an investor alert months later, in October.*