By Francis Allan L. Angelo
The Securities and Exchange Commission has revoked the of incorporation and the registration of Chiyuto Creative Wealth Document Facilitation Services OPC (One Person Company) for violating the Revised Corporation Code of the Philippines (RCC or Republic Act 11232) when it offered investment opportunities without a valid license.
In a 30-page order dated February 15, 2021, the SEC said Chiyuto Creative violated Section 44 of the RCC in relation to Sections 8.1, 28.1 and 26.1 of the Securities Regulation Code, Presidential Decree 902-A, and Section 179 (j) of the RCC.
The order was signed by Atty. Oliver O. Leonardo, Officer-in-Charge of the SEC’s Enforcement and Investor Protection Department.
The SEC also fined Chiyuto Creative of Patrocenio Calvez Chiyuto Jr., (a.k.a. Don Chiyuto/Doc Don/Don Zhang Lee Chiyuto/Mr. Solve) PHP9 million for said violations.
The SEC said it also established the administrative liability of Chiyuto’s firm for violating pertinent provisions of the SRC, without prejudice to the “filing of criminal charges violation of the Securities Regulation Code, which is punishable by up to 21 years imprisonment.”
“The Commission further reserves the right to impose sanctions and file criminal charges against other persons and entities responsible for this scam as the pieces of evidence already gathered or prospectively collated warrant under the circumstances,” the order said.
On February 1, the SEC also issued a cease-and-desist order against Chiyuto Creative which prevented it from “soliciting, selling and offering of investments to the public which are securities in the form investment contracts constitute clear violation of Section 8 of the SRC.”
‘PONZI SCHEME’
The SEC probed Chiyuto Creative’s case after receiving information that it was allegedly engaged in a Ponzi scam or a type of investment scam where the money of one investor is given to another (robbing Peter to pay Paul, according to the SEC order).
One of the tips the SEC received claimed that Chiyuto Creative enticed the public to invest with a promise that their money will be “doubled in 1, 30, or 45 days on the promotion.”
The investment scheme offered by Chiyuto and his agents and representatives (otherwise known as the “Double-Your-Money Roulette Game” scheme) “commenced through the auspices of Chiyuto Creative Wealth Document Facilitation Services, a Department of Trade and Industry-registered entity with Certificate of Business Name No. 1593167 issued on February 18, 2020 under the name of Patrocenio Calvez Chiyuto Jr.,” according to the SEC order.
The operation was mainly based in Roxas City, Capiz, the SEC document indicated.
The SEC subsequently issued warnings that Chiyuto’s firm was “not authorized to solicit investments from the public since it has not secured prior registration and/or license from the Commission as prescribed under Sections 8 and 28 of the Securities Regulation Code.”
Subsequently, Chiyuto Creative Wealth Document Facilitation Services OPC was registered with this Commission under Company Registration No. 2020110003783-00 on 23 November 2020 as a one-person corporation or OPC.
The top officials indicated in the OPC registration were Patrocenio C. Chiyuto Jr.
(sole stockholder-director-president), Judy B Pajarillo (nominee), and Felomina L. Andrada
(alternate nominee).
Notwithstanding the warnings it issued, “the company’s offering/selling of securities or investments to the public continued unabated through its owner, agents, representatives, enablers and influencers,” the SEC added.
The Enforcement and Investor Protection Department (EIPD) requested the SEC’s Markets and Securities Regulation Department (MSRD), Corporate Governance and Finance Department (CGFD), and Company Registration and Monitoring Department (CRMD) to determine if Chiyuto Creative was issued or has a pending application for a permit to offer securities for sale.
The said office was never issued permits and licenses to sell securities or issue mutual funds, exchange traded funds and proprietary/non-proprietary shares or membership certificates and timeshares.
Also, Chiyuto Creative has no secondary license “as a Lending Company, Broker and/or Dealer of Securities, Dealer in Government Securities, Investment Adviser of an Investment Company, Investment House and Transfer Agent.”
The Bangko Sentral ng Pilipinas (BSP) also issued a Public Advisory against Chiyuto Creative for “having illegally/inappropriately used its logo in Chiyuto’s websites, social media accounts, and promotional materials with intent to deceive the public and making it appear that such entity is duly-recognized by the BSP.”
“Despite the issuance of a public warning by this Commission, Chiyuto did not bother to react, much less refute the issued advisory against it,” the SEC order said.
Subsequently, Chiyuto Creative declared a “short holiday” through a Facebook post by its owner, Don Chiyuto (known also by his FB page as “Don Zhang Lee Chiyuto”), “essentially admitting their illegal operations and that there were issues confronting the company’s licenses and permits.”
“Ironically, with that admission, the company failed to perform upon itself, it’s supposed core business of ‘document facilitation’,” the SEC added.
Apart from the cease-and-desist order on February 1, the SEC also issued on February 2 a show cause order against Chiyuto and its single stockholder-director-president, nominee and alternate nominee.
The order directed them to show cause within five days from receipt why the Certificate of Registration/Incorporation of Chiyuto Creative should not be revoked and why no administrative sanctions should be imposed against the corporation.
But when the Show Cause Order was to be served by the SEC Team at the principal office address of the company (which was also the residence of Patrocenio C. Chiyuto Jr.) at 14 Ayala Alabang Village, Tamarind St., Ayala Alabang, New Alabang Village, City of Muntinlupa, National Capital Region (NCR) 1780, “the village guard on-duty at the gate, a certain SG Edwin Putian, attested to the SEC Team that while there is indeed a ‘Tamarind Drive’ inside the village, there is no existing Number 14 therein.”
On the other hand, upon request of the EIPD, personnel from the SEC Iloilo Extension Office together with National Bureau of Investigation Region VI agents, went to the declared address of Chiyuto’s alternate nominee, Felomina L. Andrada, at Rizal Adlawan, Roxas City (Capital), Capiz, to also serve the show-cause letter.
“However, as confirmed by Barangay Adlawan Punong Barangay, Roberto Ross Roldan, no such person exists within his territory. In addition, the show-cause letter was sent on 02 February 2021 to the company’s email: pcc.macaranas.abi@gmail.com which is the same email of the company’s contact person per records of the Commission, Ms. Abigail Altar Macaranas.”
The SEC also posted a Press Release at the SEC website entitled, “SEC Stops Chiyuto’s Illegal Investment Scheme” and also disseminated the same to the media.
Despite the receipt and presumptive notice of the Show-Cause Order, Chiyuto Creative “failed to respond which shall be taken against it and construed as a waiver of its right to be heard as to the allegations stated in the aforementioned Show Cause Order.”
According to the SEC, “the scheme being offered by CHIYUTO bears the tell-tale signs of a Ponzi scheme where the profits or pay-outs taken from the incoming investors or additional ‘pay-ins’ shall be paid to existing or earlier members-investors – in a nutshell, encapsulated by the idiom or phrase, ‘robbing Peter to pay Paul’ – considering that it does not have any underlying legitimate business where it could source its promised return on investments to its investors.”
The scheme is prohibited under Section 26 of the Securities Regulation Code, the agency added.
The SEC said that since Chiyuto Creative has no valid license to offer or sell securities and investments, “the activities of Chiyuto of selling or offering for sale securities in the form investment contracts is considered an ultra vires (outside what is authorized) act and therefore constitute serious misrepresentation.”
