SEC Revokes Registration of Wellcons for Offerings Likened to Ponzi Scheme

The Securities and Exchange Commission (SEC) recently invalidated the corporate registration of Wellcons Unlimited Systems, Inc. This move was made after the firm was found to have been offering what was similar to a Ponzi scheme. Wellcons promised investors the opportunity to double their money within six months. According to the SEC order, there was severe misrepresentation regarding the company’s activities.

“Considering that nowhere is it stated in the primary purpose clause of Wellcons in its Articles of Incorporation that it is authorized to engage in the selling or offering for sale of securities to the public,” noted the SEC order. “Coupled with the fact that it does not have the necessary Permit to Offer and Sell Securities, the activities of Wellcons of selling or offering for sale securities in the form of investment contracts is considered an ultra vires act and therefore constitute serious misrepresentation.”

Wellcons registered with the commission on April 19, 2021. Earlier in February, the SEC had already cautioned the public not to invest in the firm. Later in June, the regulator issued a cease-and-desist order. However, on July 5, the SEC Enforcement and Investor Protection Department (EIPD) found that Wellcons continued to offer and sell securities without a license. This gave the SEC sufficient evidence to revoke the firm’s corporate registration. The Davao City anti-scam unit also locked the office of Wellcons in Matina Crossing, McArthur Highway prior to the order.

Wellcons extended investment packages ranging from ₱2,500 to ₱13,890 under — what it regarded — a binary system. Through these investments, the firm assured members that they could receive returns between ₱9,000 to ₱32,000 per day. Wellcons also offered a pangkabuhayan program, where investors could double their earnings within six months, depending on packages from ₱1,500 to ₱5,000.

“[I]n a nutshell, [Wellcons’ scheme is] encapsulated by the saying ‘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 order furthered. The EIPD elaborated that the pangkabuhayan scheme simply took payouts from new investors to be paid to existing members.

Source: BusinessWorld