In recent years, financial fraud and Ponzi schemes (investment scams) have become a rising concern in the Philippines. With many Filipinos seeking investment opportunities to grow their hard-earned money, it’s crucial to recognize and avoid Ponzi schemes—fraudulent operations where returns are paid to earlier investors using the capital of newer ones, rather than legitimate profits from business activities.
What is a ponzi scheme?
A Ponzi scheme is a type of financial fraud where returns to earlier investors are paid using the money from newer investors, rather than from legitimate profits. The scheme promises high returns with little or no risk, attracting more participants. However, it relies on a continuous influx of new investors to keep functioning. Once new investments stop or too many people withdraw their money, the scheme collapses, leading to significant financial losses for most participants. Ponzi schemes are illegal and unsustainable because they lack a real business model to generate profits.
To help you safeguard your finances, here are the top five ways to avoid falling prey to investment scams or Ponzi schemes:
1. Understand the Business Model
A legitimate investment offers a clear business model and revenue stream. Ponzi schemes often lack transparency and do not disclose how profits are generated. Always ask, “Where does the profit come from?” If the answer is vague or the process seems suspiciously simple, that’s a red flag. Trustworthy investments will have clear, verifiable, and sustainable methods of generating income.
Tip: Avoid any investment that promises consistent, high returns with minimal or no risk, as legitimate businesses are always subject to market fluctuations.
2. Check for Proper Licensing and Regulation
In the Philippines, all investment companies should be registered with the Securities and Exchange Commission (SEC). The SEC maintains a list of legitimate businesses and investment schemes. Before investing, make sure to verify the company’s registration and check if it is licensed to offer investment products.
Tip: Visit the SEC website or contact them directly to verify a company’s credentials. If a company is not registered or has complaints filed against it, stay away.
3. Beware of Unsolicited Offers
Ponzi schemes often target individuals through unsolicited offers, whether it’s via phone calls, social media, or emails. These fraudsters use aggressive marketing tactics, appealing to emotions like greed or urgency. They might offer “too good to be true” returns, pressure you to invest quickly, or claim that opportunities are limited.
Tip: Be cautious of any investment offers that come out of the blue, particularly if they pressure you into making quick decisions. Always take time to research before committing any money.
4. Understand the Risk-Return Trade-Off
Ponzi schemes thrive on offering unusually high returns that defy market logic. If someone guarantees you a return of 20% or more in a short period, this should raise immediate concerns. No legitimate investment can guarantee such high returns without corresponding risks.
Tip: Understand that higher returns usually come with higher risks. If an investment promises extremely high returns without explaining the risks involved, it’s a red flag.
5. Consult Financial Experts
Before making significant investment decisions, seek the advice of a certified financial advisor or a licensed investment consultant. Financial experts can help you assess the legitimacy of an investment opportunity and ensure that it aligns with your financial goals and risk tolerance.
Tip: Choose advisors who are registered with the appropriate regulatory bodies such as the SEC, Insurance Commission, or Bangko Sentral ng Pilipinas (BSP) to ensure they are legitimate professionals.
Always be careful!
Protecting yourself from Ponzi schemes requires vigilance, research, and a healthy dose of skepticism. By staying informed, verifying credentials, and consulting experts, Filipinos can make smarter financial decisions and avoid the devastating losses associated with fraudulent schemes. Always remember: if it sounds too good to be true, it probably is.
Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time. Proverbs 13:11, NLT
Why you should stay away from Success 200
By Randell Tiongson on July 23rd, 2015
It almost feels like every week there’s a new scam that the SEC has to warn Filipinos about. Online investment scams are becoming more common these days as more Filipinos log on to the internet and use it in their day-to-day lives.
This week, the SEC issued an advisory warning people against Success200, telling investors to “exercise self-restraint from investing their money into such investment scheme,” which is a nice, polite way of saying “don’t put your money in this scheme.”
What is Success200? The company is essentially a scheme that asks investors to put in anywhere from P1,800 (low-end) to P36,000 (high-end), with a promised return of P10,000 to P200,000 upon payout exit, respectively. That’s a “guaranteed” ROI of 455.56%, which is unrealistically high and should already set off the warning bells in your head.
On their website, Success200 state that they are a “iuly [note: the typo is theirs, not mine – I assume they meant “duly”] registered domestic corporation with the Securities and Exchange Commission with SEC Registration No. CS201509200 issued May 12, 2015.” But just because a company is registered with the SEC, it doesn’t automatically mean they are authorized to take investments from customers. The SEC itself says in the advisory that the company has not obtained permission to solicit investments, as required under Section 8.1 of the Securities Regulation Code.
Because they have no license to take money for investments, you should not give them your money.
In their defense, Success200 state on their site that they are not an investment company; instead, they claim that they are simply in the multi-level marketing industry. But what are they marketing? The product is supposedly “pure agaricus capsules”, but to earn anything from the scheme, each participant HAS to recruit two other people. In addition to that, each person has to put in money.
Of course, some multi-level marketing opportunities can be legitimate. But if it looks like a pyramid scam, well, you know what they say; if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. And if the SEC is warning you away from certain investments, then they have good reason to do so.
Don’t lose your money to scams like this. Many victims of scams aren’t rich; they’re regular working-class people who were duped by fraudsters. Just because someone on an internet forum said that they earned money from one of these schemes doesn’t mean it’s reliable. And just because they have one form of SEC registration doesn’t mean they’re actually allowed to take your money as investments.
In fact, the Securities and Exchange Commission (SEC) has issued a warning regarding the investment taking activities of this company and its affiliates. According to the SEC, no secondary license has been issued to One Lightning Corporation. It is not supposed to be soliciting investments or selling investment products to anyone in the Philippines.
The SEC advisory includes a warning to those who intend to participate in the modus operandi of One Lightning Corporation. Individuals who try to convince others to be part of the activities of the said company will risk getting prosecuted for the violation of the Securities Regulation Code. Those who will continue recruiting more members or investors will be charged accordingly.
SEC Investigation
The Securities and Exchange Commission conducted further investigation on One Lightning because it is a SEC-registered company. The SEC cannot simply release a statement similar to the one issued for Emgoldex Philippines, which is not even registered with the Commission.
The SEC investigation found that One Lightning Corporation invites “investors” to its cosmetics and health care product line. These prospective investors are promised high returns on their investments in a scheme marketed as a “revolutionary compensation plan.” In this scheme, investors will get 70% of the company’s profits.
Just like other companies that attract investors through referrals or recruitment, One Lightning Corporation also dangles recruitment commissions or bonuses called “referral award” and “maturity award,” both of which are pecuniary in nature.
The referral award is given to someone who successfully recruits a new investor, while the maturity award is given to someone whose recruits have recruited other investors. The referal award is around 5% of the investment paid in while the maturity award is around 2%.
In an interview with ANC, Gerard Lukban, commission secretary of the SEC, said that it is not enough that a company is registered in the Philippines for its activities to be considered legal or legitimate. In the case of One Lightning, the act of selling of investment contracts to the public requires SEC’s scrutiny of the company’s registration statement and prospectus of what is being offered.
The SEC referred to One Lightning Corporation’s activities as a pyramiding operation.
Why SEC considers One Lightning a scam
According to SEC secretary Gerard Lukban, there were two violations committed by One Lightning: (1) the questionable investment contracts being offered, and (2) the company’s lack of a licensed salesman to sell the investment contracts. As the SEC advisory stated, the company does not have the permission to publicly offer securities and solicit investments.
Avoiding Similar Scams
Financial advice websites as well as government authorities will tell you a number of common factors that indicate whether or not an investment or “grow your money” company is fraudulent. They include the following:
Lack of government licensing (registration) or recognition by the appropriate government agencies
Lack of legitimate products or actual revenue-generating business operations
Too good to be true (guaranteed high returns)
Difficult to find official information about the company
Focus is on the recruitment of “investors”
It’s important to note, however, that fraudulent companies at present have already evolved. Some are now registered with the government and also have products to sell. That’s why emphasis should be placed on “appropriate registration or licensing” and “legitimate products.”
As the SEC secretary mentioned, it’s not enough for a company to be registered and that the products being offered should also be examined for the proper licensing or permission to be publicly offered. In the case of One Lightning, it is SEC-registered, but it does not have the necessary permission to offer investment products.
It’s important to be very cautious with all financial decisions you make, especially when dealing with investment opportunities that are mostly being marketed online. Skepticism is advised and encouraged. This need for prudent financial decision-making, however, is not limited to investments. It also applies to making decisions on loans and credit cards.
Fortunately, there are transparency and comparison services like MoneyMax that can help you in differentiating the legitimate offers from the fraudulent ones, as well as the good from the better. They can facilitate a more informed scrutiny of your options. Comparison sites curate a great deal of relevant information and resources that make it easier to see the pros and cons of the choices you are considering.
The Internet is your friend. Make good use of it to research and compare, so you can be at an advantage in your financial decision making concerns. Don’t fall for a scam like One Lightning Corporation.
