SEC files criminal complaint vs MFT Group

MANILA, Philippines — The Securities and Exchange Commission (SEC) has filed a criminal complaint against the MFT Group for unauthorized solicitation of investments.

In a statement, the SEC said it has brought Maria Francesca Tan (MFT) Group of Companies Inc. and Foundry Ventures I Inc. before the Department of Justice for criminal prosecution over their illegal investment taking activities.

A criminal complaint was filed by the commission for the group’s alleged violation of Sections 8, 26 and 28 of the Securities Regulation Code (SRC), in relation to Section 6 the Cybercrime Prevention Act of 2012.

The SEC also charged the MFT Group and Foundry Venture with violation of Section 54.1 (c), in relation to Section 54.2 of the SRC and Section 177 of the Revised Corporation Code, and SRC Rule 68, in connection with material misrepresentations in their audited financial statements (AFS).

The filing of the criminal case stemmed from complaints submitted by several investors who participated in the investment scheme of the MFT Group, which later transitioned to Foundry Ventures.

According to the commission, the MFT Group allegedly promised guaranteed returns ranging from 12 percent to 18 percent of the amount they invested, which was considered as interest income.

The scheme was made through the issuance of post-dated checks reflecting a one percent to 1.5 percent monthly interest to interested investors, who were given either a promissory note or borrower-lender agreement, as proof of their investment, the commission said.

“The instruments executed by MFT Group and Foundry Ventures are clearly investment contracts considering that the scheme, the transactions, as well as the attendant circumstances show that elements provided under SRC Rule 26.3.5 are all present (which are also the elements under the Howey Test),” the SEC complaint stated.

The SEC on April 1 made permanent the cease and desist order it issued against the MFT Group and Foundry Ventures in January, where the officers and directors of the companies were directed to stop their investment solicitation activities without the necessary licenses from the commission.

The SEC added that it found that the MFT Group and its officers and directors are liable for 17 counts of misrepresentation in its 2018 to 2021 AFS by reflecting dividend income which has no basis.

In relation to the misrepresentations in the MFT Group’s financial statements, also implicated in the SEC complaint was Isla Lipana & Co., which served as the independent auditor of the MFT Group and Foundry Ventures for the fiscal years 2018 to 2021.

The SEC said it found that Isla Lipana colluded with the MFT Group in their fraudulent activities by making it appear that the financial statements of the company were fairly presented despite inconsistencies and inaccuracies in the AFS.

According to the SEC, Isla Lipana issued an unqualified opinion for the years 2020 and 2021, indicating that the AFS of the MFT Group are fairly presented in all material respects and in accordance with the identified financial reporting framework.

“The investing public, including and especially MFT’s investors, relied on these AFS in making investment decisions. Stated otherwise, the information/entries in the AFS of the MFT Group were essential in convincing investors to part with their hard-earned money, and entrust the same to the MFT Group, because they presented MFT Group as financially healthy and viable,” the SEC complaint read.