Friday, May 24

SEC issues cease, desist order against Infinity8Networks

THE Securities and Exchange Commission (SEC) has issued a cease and desist order against Infinity8Networks Digital Services OPC and related entities  for illegally soliciting investments from the public.

In an order dated January 16, 2024 the Commission En Banc directed Infinity8Netoworks to immediately cease and desist from further engaging in the unlawful solicitation, offer, and/or sale of securities in the form of investment contracts without the necessary license from the SEC.

The Commission further prohibited Infinity8Networks from transacting any business involving funds in its depository banks, and from transferring, disposing, or conveying any related assets to ensure the preservation of the assets of its investors.

The order covers Infinity8Networks’ single stockholder, director and president, Franco Delacruz Flordeliza, nominee James Floredeliza, alternate nominee Dave Delacruz Flordeliza, founder and chief executive officer Froilan Pediongco Flordeliza, and other officers, operators, promoters, representatives, salesmen, agents, uplines, enablers, influencers, and any and all persons, conduit entities, subsidiaries and affiliates claiming and acting for and on its behalf.

The Commission issued the cease and desist order after the SEC Enforcement and Investor Protection Department (EIPD) found that Infinity8Networks was actively offering and selling unregistered securities in the form of investment contracts to the public.

Infinity8Networks offered investment plans ranging from P500 to P5 million for a guaranteed return of 30 percent in five days to 500 percent in 40 days. Infinity8Networks also promised investors an additional income of 5 percent for their referrals.

Infinity8Networks’ scheme involved the sale and/or offer of securities in the form of investment contracts, whereby a person makes an investment of money, in a common enterprise, with the expectation of profits, to be derived solely from the efforts of others, the Commission held.

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“Furthermore, the act of [Infinity8Networks] in carrying out its unauthorized investment-taking activities using the social media. i.e. Facebook accounts, as well as through programs attended in person by the public constitute public offering as defined under Rule 3.1.17 of the 2015 [Implementing Rules and Regulations of the Securities Regulation Code],” the Commission added.

Section 8 of Republic Act No. 8799, or The Securities Regulation Code (SRC), provides that securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the SEC.

Based on the records of the Commission, a one person corporation was registered under the name, Infinity8Networks Digital Services OPC. However, the corporation neither registered securities for public offering nor secured a secondary license to sell, offer or deal in securities.

“At the outset, the Primary Purpose Clause in the AoI (articles of incorporation) of [Infinity8Networks Digital Services OPC] specifically provides that it has no authority to solicit or accept investments from the public,” the Commission noted.

“[A] corporation is a creature of limited power in the sense that it can only exercise those powers which are expressly conferred on it by the [Revised Corporation Code] and those that are implied by or incidental to its existence.  Clearly, the AoI of [Infinity8Networks] does not contain a grant of authority to solicit investments and/or deal in securities. In the absence of such grant, any investment activity cannot be sustained using the doctrine of implication and/or under the argument that it is incidental to its existence.”

The Commission further held that Inifnity8Networks’ act of selling and offering securities without the requisite registration statement “constitutes fraud which should be promptly restrained for the protection of the investing public.”

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The Commission warned the public against investing in Infinity8Networks as early as November 13, 2023 through an advisory. The EIPD would later order Inifnity8Networks to pay a fine of P1 million, and revoke its corporate registration, on December 18, 2023. (PR)