The SEC filed yesterday before the Department of Justice a criminal complaint against H-Factor for violation of the Securities Regulation Code provision requiring prior registration of shares before any sale is consummated.
H-Factor was found to have sold unregistered investment contracts with a guaranteed a monthly interest of eight to 18 percent for a minimum placement of P50,000 in a short period of time.
The company was formed only in July 2002 by siblings Leo Alvin Hadi and Leo Andreau Hadi.
Records showed that the company had collected at least P350 million from various investors.
The filing of the complaint followed the raid conducted by the SEC on the offices of H-Factor in Sta. Rosa and Binan, Laguna last Friday. Five people were arrested during the raid. These included Rowena Hadi, wife of Andreau and vice-president of H-Factor, and a certain Dorina Umali.
The five were brought to the justice department for further investigation.
The SEC began its investigation into H-Factor last November following queries from the public on the legality of operations of the company. Investors also complained about the company’s failure to pay promised interests. H-Factor reportedly committed to start making the promised payments on April 1.
Pseudo-investment companies have mushroomed in recent months as more and more people have been hooked into these get-rich-quick schemes due to the need to earn extra money in these difficult times.
Many investors have been approaching the SEC to ask for help in recovering money placed in these pseudo-investment companies that turn out to be scams.
The SEC has issued several cease-and-desist orders against companies such as Glasgow Credit and Collection Services Inc., Multinational Telecommunications Investors Corp., Mateo Management Group, Tibayan Group of Companies, and Five Vision Enterprises for illegally selling securities without prior registration.
The corporate watchdog is encouraging individual investors to file criminal cases of syndicated estafa and swindling against pseudo-investment companies since the SEC only filed cases for violation of the src. Syndicated estafa is a non-bailable offense punishable by death.
To hasten the filing of criminal cases against operators of the ponzi scheme, the SEC will ask the DOJ to form a special prosecuting team to handle cases involving pseudo-investment companies. The penalty for src violation is seven to 21 years in jail.
So far, only the Makati Prosecutors Office has charged Multitel officials with violation of the src.
A ponzi scheme is a type of investment fraud wherein the operator promises high financial returns that are not expected from traditional investments. Instead of investing victim’s funds, the operator pays the original investors with the money given by new investors. Usually, money is returned to investors in the first few months to make them believe that profits are actually being realized.