Background
Maybe some of you have heard the name Joseph Calata (guy in the picture above) especially sa mga members dito na nag-iivest din sa Philippine Stock Market. Joseph Calata is or was the CEO of the now delisted Calata Corporation (agribusiness company) who attempted to get back in the game sa pamamaraan ng pagbenta ng "stock like" cryptocurrency aka Security Tokens. Itong kaso na ito ay ang pinaka unang kaso sa Pilipinas na involved ang unauthorized ICO offering sa bansa. What interest me in this case is it is similar to cases found in the United States na kung saan ay strikto pag-dating sa mga ICO offerings done locally involving Security Tokens, for your comparison ito yung pinaka recent na
kaso ng US-SEC against Telegram which has also classified their token (GRAMs) as a security and not as a utility na unang classification nila. Hopefully na yung post na ito ay makakatulong sa pag-intindi ninyo kung ano nga ba talaga ang security tokens at bakit may mga SEC departments ay strikto sa kanilang mga offering.
Beginning
click the image for the news report
Lahat ito nagsimula nung December 11, 2017 na delist (natanggal) sa Philippine Stock Market ang Calata Corporation (CAL) ni Joseph Calata, the involuntary delisting is due to the 29 violations na ginawa nya as the CEO and Chairman ng kumpanya. Kasama na dito kung paano niya minislead yung investors niya about them expanding in the gaming sector (casinos) sa upcoming Mactan Airport project noon, yung company disclosure na yun immediately boosted the speculative value of CAL from 2.97 ₱/share umakyat ng 4.28₱/share which is around 60% gain, the catch is yung disclosure na ito ay walang bahid ng katotohanan Joseph Calata released a disclosure based on a rumor na sya din ang gumawa. During this na-diskubre din ng SEC na habang tumataas yung stock Joseph Calata was actively trading his own shares of the company dahil na din sa price action na na-idulot ng false company disclosure nya in simple terms Calata committed insider trading using the fake information he have.
SEC with the involuntary delisting set in place also ordered Calata to buy back the shares of their disgruntled investors. However Calata directly said na yung retained earnings ng kumpanya ay hindi sapat para ibigay yung minimum na 1 Billion PHP na buy back offer para sa mga investors and up to this date Calata have rejected all orders from the SEC about the buy back offer for all investors, however this lead to the alternative of Calata offering a cryptocurrencies to its investors as replacement for their delisted stock shares.
Alternative Solution: Calata Plans to Convert All Outstanding Shares into Cryptocurrencies
click the image for the Youtube video
3 months before being officially delisted Joseph Calata announced that Calata Corporations is going global dahil sa kanilang
CalCoins offering citing in the announcement the current prices of Bitcoin and Ethereum going up in astronomical figures, sinusubukan niyang ipahiwatig na baka lumundag din presyon ng magiging ICO niya. Pag-tinignan mo yung
20:45 minute mark ng Youtube video makikita ninyo na sinabi ni Calata na "holding a token is equivalent of ownership of stocks" (take note ninyo it) dun palang mali na sya. This was a press conference designed to give solution para sa mga shareholders na magkakaroon ng worthless stock in just 3 months, Yung gusto lang ni Calata is mapapayag nya lahat ng investors to say yes para ma-distribute na nya yung CalCoins. Fortunately sa mga investors this plan died down dahil na din sa lack of interest ng mga shareholders sa proposal nya at sa paghintay nalang ng buy back/tender offer sakanila kaya hindi natuloy itong CalCoins na ito. Up to this day wala pa ding nagagawa si Joseph Calata para sa mga shares ng investors hindi nakapag-liquidate.
KROPS ICO and Sudden Appearance of Black Cell Technology Inc.
January 2018 about a month after CAL being delisted in the PSE bigla nalang nakatanggap ng mga reports ang SEC na si Joseph Calata ay may ino-offer na naman na bagong cryptocurrency named KROPS (KRO) gamit ang kumpanya na Black Cell Technology Inc., Upon further investigation of SEC napatunayan nilang may nangyari ngang unauthorized selling ng KROPS ICO dito sa Pilipinas. Pero bakit nga ba may Black Cell Technology na kumpanya dito at bakit sila yung nagbenta ng ICO ni Joseph Calata? Both Calata and Black Cell Technology ay nagbenta ng walang mga kailangan na lisensya o authorization sa gobyerno sa kanilang selling regardless if Utility o Security man ito.
Black Cell Technology Inc. : A Hong Kong Incorporated Company based in Bulacan, Philippines???click the image to see the full resolution
Base sa company profile na makikita sa
whitepaper ng KROPS ang owner ng Black Cell Technology is none other than Joseph Calata. Honestly bukod sa Black Cell Technology meron ding mga tinayong Hong Kong incorporated companies si Calata namely Black Sands Capital at Black Cell Technology Ltd but since they all have similar boards at ang tanging si Black Cell Technology Inc. lang ang nagbenta ng ICO sa Pilipinas kaya for the sake of brevity tatawagin ko nalang silang lahat ng Black Cell Technology . Black Cell Technology according sa SEC cease and desist
report nila ha no operations in Hong Kong but was just incorporated there, yung whole operations pa din nila is based sa Manila.
Proving my point is the fact na yung principal office address ng Black Cell Technology instead of a Hong Kong address ang linista nilang address is galing sa Pilipinas specfically sa Pulilan, Bulacan. Bukod dun lahat ng incorporators ng kumpanya ay walang nang-galing sa Hong Kong lahat ay nakatira sa Pilipinas. These incorporators namely Joseph Calata, Maricar Malaki, Halmond Ong, Jose Fabella, Solilapsi are also members of the board ng Calata Corporationm in short Black Cell Technology is Calata Corporation disguised as a Hong Kong based company. Kaya siguro nag-under the radar itong kumpanya na ito sa kanilang unang attempt sa pag-offer ng cryptocurrency sa Pilipinas kasi it was done locally at hindi internationally.
How did the SEC Identify KROPs Coin as Securities? - Howey Testclick the image to see the full resolution
Bukod sa pag-papatunay na nag bypass nga ang KROPs at si Joseph Calata ng mga certain regulatory requirements para sa pag-conduct ng ICO dito from KYC, no license, at no authorization ang ICO ni Calata ay maitututing na Security Token base sa Securities Regulation Code (SRC) Section 3.1. Base sa depinisyon ng isang security makikita mo na ang KROPS ay isang "investment contract" na in-offer ng isang commercial company through electronic means. In simple terms pag ang isang kumpanya ay nag-offer ng isang cryptocurrency it will most likely be classified as a security token.
click the image to see the full resolution
SEC to further prove the point that KROPS coins are securities ay gumamit sila ng test na ginagawa galing sa United States for identifying securities and investment contracts namely the Howey Test. I will only comment on 1 and 4 since ito yung heavily disputed ng dalawang partido namely Black Cell Technology and Enforcement and Investor Protection Department (SEC). Since 2 and 3 are accepted by Joseph Calata right away SEC only needs to prove the other two para ma-kumpleto yung Howey Test security classification para sa KROPS coin.
[1] Calata argued that "KROPS" ay pangalan lang ng mobile app nila at hindi ito kumpanya they also argued that KROPS cannot be considered as "Investment of Money" since ginagamit lang daw yung cryptocurrency nila as "medium of exchange". Dito nagkamali ng argumento si Calata kasi mabilis na kinontradict ng sariling Whitepaper ng KROPS yung statement niya. SEC specifically quoted their whitepaper stating that KROPS is not a mobile app pero isang "start-up company" pangalawa SEC also quoted that KROPS is on "ICO phase" quickly disproving the statement na ang token nila is a type of medium of exchange since wala pa naman makikita sa merkado na gumagamit ng KROPS as a payment method.
[4] Calata argued that yung pagtaas ng presyo ng cryptocurrency nila shouldn't be counted on their side stating na ang merkado daw ay volatile at yung nagdidikta ng presyo is yung demand sa market. Another invalid argument made by Calata, SEC responded by telling that since Black Cell Technology (juridical entity) is handling the efforts at yung expected profit ng kumpanya ay ipapamahagi sa KROPS holders ay nag-papakita na nakadepende nga yung value ng KROPS sa effot ng ibang tao/entity, SEC also emphasizes that there is also a profit distribution dun sa magiging earnings ng kumpanya.
Ending
click the image to see the full resolution
Nanalo yung EIPD (SEC) sa kaso na ito dahil na satisfy nila yung four elements ng Howey Tests it resulted in a ban of the ICO being conducted in the country sa ngayon yung presyo ng KROPS ay 0$ at hindi na din active ang cryptocurrency na ito sa kahit anong crypto exchange. It had further damage the reputation of Joseph Calata again sa mga mata ng SEC at PSE for attempting to evade the ban na nakalagay sakanya sa stock market, it wasn't really a brilliant move kung iisipin kasi dalawang beses na syang nakapag-loko ng investors once sa stock company niya and dito naman sa KROPS at yung masakit dun ang pinaka-malalang penalty lang sa mga white-collar criminals na katulad niya is either ban, fines, o penalty lang walang pag-kakakulong. It was a good thing that the SEC acted out quickly na wala pang isang buwan na ban na yung ICO ng KROPS dito kasi kung hindi baka dumami pa ang maka-bili sa shitcoin niya.
Sa tingin ko mag-kakaroon tayo ng similar approach katulad ng ginawa ng US SEC which has two classifications of ICO offerings one is yung Utility Token and yung tinatawag na Security Token which is similar to being a stock of a company. Pwede tayo mag-expect na additional regulation dito dahil may iba't-ibang uri na tayo ng ICO offerings
Kung natatandaan niyo naka-gawa ako ng
post related sa ma-aaring maging batas natin sa cryptocurrency dito sa Pilipinas at buti nakita ko yung kaso na ito dahil dun sa previous post ko nag-speculate ako kung ano yung magiging classifications natin para sa cryptocurrency. Sa kaso na ito na confirm natin na recognized nga ng SEC ang Security Tokens at Utility Tokens. So dapat mag-expect na tayo sa mga upcoming ICOs done locally kung may proper licenses and documents sila on locally offering their ICO.
