Editing by Nathaniel Cajuday

• The SEC has issued a public advisory against CSTMINE.COM, an illegal investment scheme posing as a crypto mining platform, for being an unregistered entity to sell securities, which also possesses a Ponzi Scheme. 
• According to the Commission, the initial investment fund that the entity demands start from ₱400.00 to ₱7,700.00, and takes about 25 to 150 days to double the invested money. 
• In the same advisory, the regulatory agency noted that scams involving supposed crypto mining activities are not uncommon, and these illegal investment-taking schemes that often victimize the investing public take many forms.

Despite the efforts of the Securities and Exchange Commission of the Philippines (SEC) to counter illegal investment schemes posing as crypto mining platforms, the Commission is still receiving reports regarding these entities. 

In fact, in its recent advisory, the SEC warned the public against the website CSTMINE.COM, which, according to the regulatory agency, is a scam website operating unauthorized investment-taking activities under the guise of purported crypto-mining undertakings where it entices its investors to earn through leasing or owning a supposed “crypto mining” machine. 

The SEC emphasized that the website administrators left their investors high and dry as “they were not able to withdraw their investments when the website closed and became inaccessible.”

In a statement, the Commission explained that due to the increasing popularity of cryptocurrency in the country, specifically Bitcoin, which is the largest cryptocurrency in the world, and the way it is earned, through mining. 

“Put simply, ‘Crypto Mining’ or cryptocurrency mining is the process of creating new digital ‘coins.’ A more technical explanation of crypto mining can be explained through the example of Bitcoin mining where the said crypto mining originated. Bitcoin mining involves powerful computers that ensure that transactions are valid and correctly added to the Bitcoin blockchain, this process is also the means whereby Bitcoin is created. Apparently, this is the concept that the new scammers are leveraging on to entice their prospective victims to invest hard-earned money on their illegal investment-taking schemes like the subject entity at hand, CSTMINE.COM,” the SEC explained. 

As per the Commission, the entity was enticing its prospective investors with a guaranteed profit through a machine—the investor must first lease or own the machine, which requires an initial capital of at least 3,500.00 Nigerian Naira (around ₱400) up to 65,000.00 Nigerian Naira (approximately ₱7,700). 

For the investors to receive their profit and guarantee high returns, the entity further encourages them to invest more, as the earnings of the investors also depend on the timing of when the initial capital is deposited. 

Aside from timing, the investors are also promised to earn a daily income through “mining,” wherein the said daily income depends on the initial profit. A period of 25 to 150 days is required to earn the projected profit, which is around twice the initial capital. 

In addition, for investors to have their “own” computing machine, they have to put in a considerably higher amount of initial capital. To compensate for the high cost, the platform promised them profit each time they successfully recruit an individual to invest in their scheme. 

“CSTMINE.COM also offers incentives or bonuses from logging in to their website. Every time a user checks in to their website or mobile application, the users are rewarded. The rewards increase depending on how many consecutive days they check in to the website or mobile application. This incentive or bonus is only an option but the investor will still earn through the commissions from their investment,” the SEC stated.

Accordingly, the Commission emphasizes that the “investment contract”—which exists when there is an investment or placement of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others—formed within the CSTMINE platform does not comply with the Securities Regulation Code (SRC), which requires registration with the Commission. 

The SEC also noted that the concerned entity and agents should have the appropriate registration and/or license to sell such securities to the public. 

“Based on the records of the Commission, CSTMINE.COM is NOT REGISTERED with the Commission AND OPERATES WITHOUT THE NECESSARY LICENSE AND/OR AUTHORITY to solicit, accept or take investments/placements from the public nor to issue investment contracts and other forms of securities defined under Section 3 of the Securities Regulation Code (SRC),” the SEC highlighted. 

Furthermore, the Commission emphasized that the CSTMINE scheme is indicative of a possible “Ponzi scheme,” in which funds from new investors are used to pay fake profits to prior investors, and is designed primarily to benefit its top recruiters and prior risk takers while being detrimental to subsequent members in the event of a scarcity of new investors. Ponzi schemes are not registrable securities.

“In view thereof, the public is hereby advised NOT TO INVEST or to STOP INVESTING in the investment scheme being offered by CSTMINE.COM, and its representatives… Accordingly, the Commission warns all unscrupulous individuals and/or entities that strict penalties are imposed for violations of the Securities Regulation Code, the Revised Corporation Code, and such other rules and regulations enforced by the Commission,” the Commission warned.

Other schemes posing as Cryptomining

In the same advisory, the SEC also noted that scams involving supposed crypto mining activities are not uncommon, and these “illegal investment-taking schemes that often victimize the investing public take many forms”:

“Some entities even depict themselves as saviors to those who have been already victimized by other entities.”

In 2020, the Commission issued a public warning against Mining City, a cryptocurrency mining contract platform that also used shared mining equipment located in a remote data center. The equipment is to be funded by those who avail themselves of Mining City contracts.

Just last year, the SEC warned the investing public against transacting with individuals or groups of individuals representing HEROMINING/HERO MINING/HERO MINING INTERNATIONAL GROUP. The entity promises the investor earnings from ₱1,000 up to ₱144,905. Moreover, investors are also enticed by the promise of earning 60% of the profit of their successful recruits or invited friends. 

(Check out more SEC Advisories on BitPinas.)

This article is published on BitPinas: SEC Issues Advisory vs Fake Crypto Mining Website CSTMINE.COM

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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• Source: https://bitpinas.com/regulation/sec-advisory-vs-cstmine-com/