The Securities and Exchange Commission has haled into court the Maria Francesca Tan Group of Companies Inc. and Foundry Ventures I Inc. over alleged illegal investment taking activities.
Also implicated was the auditing firm Isla Lipana and Co., which served as independent auditor of the MFT Group and Foundry Ventures from fiscal years 2018 to 2021.
The SEC has filed a criminal complaint at the Department of Justice against the MFT Group and Foundry Ventures for violation of the Securities Regulation Code (SRC), in relation to Section 6 of Republic Act No. 10175, or the Cybercrime Prevention Act of 2012.
Implicated in the complaint were officers of MFT Group and Foundry Ventures, including Maria Francesca Tan, Eduardo Tan, Florita Tan, Enrique Eduardo Tan, Charles Edward Tan, Christian Konstantin Agbayani, Mario dela Fuente, Philip Tan, Jenna Fuentes, among others.
The case arose from complaints submitted by several investors who participated in an investment scheme perpetrated by the MFT Group that later transitioned to Foundry Ventures. The MFT Group allegedly promised guaranteed returns ranging from 12 percent to 18 percent of the money entrusted to them as investment.
Participants were issued post-dated checks reflecting 1 percent up to 1.5 percent interest each month as proof of the authenticity of their investment.
“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 complaint said. The Howey Test determines whether transactions qualify as investment contract and by this measure have to be regulated.
The SEC also said the unauthorized investment-taking activities of MFT Group and Foundry Ventures resemble the Ponzi scheme since their success and viability are anchored on the additional investments of existing investors and/or the investments of new investors.
The SEC subsequently issued a cease and desist order against the MFT Group and Foundry Ventures and their officers and directors in January subsequently made permanent on April 1.
The SEC found the MFT Group and its officers and directors are liable for 17 counts of misrepresenting audited financial statements from 2018 to 2021 by reflecting dividend income which had no basis.
According to the SEC, the amount received by the MFT Group from investors should have been recognized in its books of accounts either as part of the company’s liabilities or as creditor’s equity or share capital or stockholder’s equity consistent with the accounting equation that any increase in assets must have a corresponding increase in liabilities or capital or both.
The SEC said it found the auditing firm Isla Lipana in alleged collusion with the MFT Group in their fraudulent activities by making it appear that the financial statements were fairly presented despite inconsistencies and inaccuracies.
“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,” according to the complaint.
“Considering that this discrepancy happened over the years, and given its significant impact on the financial position of the MFT Group, the same cannot be considered an isolated event. The fact that respondent auditors repeatedly engaged themselves in this kind of irregularity is a clear indication of its intention to conceal the actual financial status of the MFT Group, to the prejudice of its investors,” the SEC said.
