PH SEC Alerts on Risks with Arbitrage Trade & FX Affiliate Investments

The Philippine Securities and Exchange Commission (SEC) has implemented a substantial safeguard for Filipino investors by publicly informing the public regarding the engagement of two entities—Arbitrage Circle Trade and FX Affiliate—in financial activities lacking the requisite legal authorizations. The memoranda provide insight into the operational strategies of the two entities, which advertise substantial investment returns in a fashion reminiscent of fraudulent securities offerings and, in one instance, a Ponzi scheme-like framework.

The Scheme of Arbitrage Circle Trade Due to its assertive advertising of investment opportunities, Arbitrage Circle Trade, run by Gabby Fernandez as its chief executive officer, has drawn criticism. The organization has been enticing members of the public through social media platforms like Facebook with the promise of lucrative returns. One example suggests that a Php 1,000 initial investment will increase to Php 1,200 in seven straight days and Php 3,000 in 45 days. Such proposals qualify as “investment contracts” under the Securities and Exchange Code (SRC), requiring registration and licensing, neither of which Arbitrage Circle Trade possesses, according to the SEC's investigation.

In contrast to the profit generated from the lawful operation of the company, the SEC further asserts that the operational model of Arbitrage Circle Trade exhibits the attributes of a Ponzi scheme. A Ponzi scheme entails the fraudulent practice of compensating previous investors with the funds contributed by new investors. Deliberately designed to favor early participants at the expense of later participants, these schemes become especially untenable as the influx of new investors diminishes. Consequently, they cease to be sustainable and become unmaintainable.

Exposure of the Operations of FX Affiliate

Furthermore, it has come to light that FX Affiliate, an entity represented by Senyor Valdez and others and managed by Joed Baron, was proactively pursuing public financing for a foreign exchange trading scheme that it claimed to be powered by the artificial intelligence bot zheroFx Robot. In addition to provisioning referral and leadership incentives and guaranteeing a 100% return on investment within sixty days, the organization underscored the importance of its offering by doing so.

According to the SEC advisory, Joed Baron's prior involvement with organizations such as Yeheey iTraffic System Inc. and PAYS UP ONLINE MARKETING BUSINESS INC., which have both received regulatory violations-related SEC advisories, further undermines the credibility of FX Affiliate's activities. The commission has determined that Baron's ongoing cooperation via FX Affiliate constitutes an infringement of various provisions of the SRC. These violations encompass fraudulent transactions and unlicensed securities activities.

Implications for the Law and Public Advisory

These violations are subject to severe penalties under the SRC, including fines of up to Php 5,000,000 or imprisonment for up to 21 years, as emphasized by the SEC. The primary objective of the advisories is to deter the general public from engaging in these fraudulent schemes; furthermore, they highlight the grave legal repercussions that await those who facilitate or advocate for such unlawful undertakings.

It strongly suggests that potential investors verify the registration and licensure of the entities offering investment opportunities through thorough research. The SEC's proactive approach to safeguarding investors' financial security and ensuring a regulated investment environment in the Philippines is evident in its dedication to preventing fraudulent schemes.

In conclusion

The SEC's warnings regarding Arbitrage Circle Trade and FX Affiliate, in which suspicious entities attempt to exploit uninformed investors, highlight the persistent difficulties in the financial sector. The commission relies heavily on the mentioned advisories to promote public awareness, deter potential fraudulent activities, and preserve the integrity of the Philippine financial markets.