Ponzi Schemes in the Philippines

Ponzi schemes have been in existence for almost a hundred years. It’s amazing how these fraudulent “investment” schemes are still flourishing to this very day, even with the fast dissemination of information through social media and other modern means of communication. Let’s take a look at the documented Ponzi schemes in the Philippines.

Ponzi schemes and Pyramiding

“Ponzi scheme” is named after Charles Ponzi who ran his scam in the 1920s. Under the original scheme perpetrated by Ponzi, bonds were offered at a 50% interest in 45 days. This means that if the “investor” holds on to the bond for 90 days, the “investor” would receive a 100% profit. Money received from subsequent “investors” was used to pay prior “investors”. Paying 100% profit in 90 days means getting more and more “investors,” which means that it’s only a matter of time before the whole scam collapses. The scheme cannot be sustained and subsequent “investors” end up holding an empty bag, so to speak.

A Ponzi scheme is similar to pyramiding. In the classic “pyramid” scheme, according to the US Securities and Exchange Commission, participants attempt to make money solely by recruiting new participants into the program. [See Ponzi and Pyramid Schemes: Internet-based Ponzi Schemes] According to the Philippine Securities and Exchange Commission (SEC), the promoters (who are on top) in a pyramid scheme entice others down the line to bring in others in an ever-widening triangle, so that the top feeds from those at the base. It is only a matter of time before new “recruits” will run out, and the whole triangle collapses. [See Networking, Pyramiding and Multi-Level Marketing (MLM)]

In other words, a “pyramid” scheme relies on members who puts in their investments, while at the same time actively recruiting other members who, in turn, also puts in their investments. A Ponzi scheme does not rely on members to recruit other members. New investors flock in because of extravagantly high returns.

Ten-fold return after 15 days

In 1989, the Spouses Vicente Jr. and Adrian Menil ran an investment scheme in Surigao City and its neighboring towns. Under the scheme, investors were assured that their money would be multiplied ten-fold after 15 calendar days. Each investor may invest a maximum amount of P1,000. In other words, each investment of P1,000 would bring in a return of P10,000 after 15 calendar days. The scheme collapsed after a few months. To read more, see Ponzi Scam: The Menil Case.

Triple your money in 30 days

The Panata Foundation of the Philippines, Inc. was organized in 1989 and registered with the SEC as a non-stock, non-profit corporation. Operating in Palawan, it promised depositors that their money would be doubled within 21 days, or tripled if the period lasted for more than 30 days. The investment limit is P5,000, but the limit was easily circumvented by putting the account in another person’s name.

When initial payments were made, more investors were encouraged to join. Existing investors did not withdraw their investments and, in addition to re-investing the money, added more investments. The Foundation subsequently failed to service its creditors and closed also in 1989, a few months after it’s registration. To read more about this case, see Ponzi Scam – the Panata Foundation case.

800% return 15 days

A company initially engaged in marketing, Surigao San Andres Industrial Development Corporation (SAIDECOR), started operations in August 1989. It had operations in Butuan City and Agusan del Norte. The company subsequently solicited funds and investments from the public, guranteeing a 800% return on investment within 15 or 21 days.

The scheme involved the issuance of coupons to investors. The coupons would contain the amount of the “capital” or investment, the return on the capital collectible, and the date agreed upon. SAIDECOR stopped operations in September 1989 after millions of pesos were “invested” in the company. [Source: People vs. Martin Romero and Ernesto C. Rodriguez, G.R. No. 112985, 21 April 1999]

Investigation on Aman Futures

In 8 October 2012, the SEC issued a Cease and Desist Order (CDO) against Aman Futures Group Phils, Inc.  According to the SEC, Aman Futures “receives or accepts investments or money placements from a growing number of investors with an agreement to return the entire sum in the form of post-dated checks plus investment profit, which ranges from 15% to 30%, or even as high as 40%. Thus, it appears that what lures investors in parting with their money is the promise and corresponding expectation of high returns or profits.” Aman Futures has been able to collect P244Million from its investors.

Despite the label made by some that Aman Futures is allegedly engaged in a Ponzi scheme [see Rappler (“SEC warns of Ponzi scheme offering 40% returns”) and ABS-CBN (“SEC issues CDO vs Zambo-based Ponzi scheme”)], there’s no such finding by SEC in the CDO it issued. The SEC Order enumerated four violations: non-registration of securities sold to the public; non-registration as broker or dealer; engaging in commodity futures contracts without authority; and exceeding its stated purpose by engaging in the business of soliciting and accepting investments and money placements from the public.

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