Manila, Philippines
geri@investmoney.com.ph

SEC Issues Advisory on Organico Agribusiness Crowdfunding

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23Sep2018 Update: SEC has also issued an advisory on PhilCrowd. Read more here.

29Jul2018 Update: Read comments on FarmOn Cycle 19 Opening for updates on FarmOn SEC registration.

29Jul2018 Update: See comments section below on the SEC registration of Organico and their supposed explanation about the investment license. Still, caveat emptor.

ORGANICO

Last month, the Securities and Exchange Commission (SEC) issued an advisory about Organico Agribusiness Ventures Corporation (Organico). Oddly, the advisory says that Organico is not registered with SEC as a corporation or a partnership (all companies have to be registered with SEC). In that sense, Organico should not be using “corporation” in their name.

But wait, there’s more. Likewise, the advisory says that Organico is not authorized to solicit, offer and sell investments. To solicit investments, a company should have a secondary license regarding offering investments to the public. Being registered in SEC as a company is one thing, being allowed to offer and sell investments requires a different permit altogether.

Another red flag cited by SEC is the guaranteed investment returns offered by Organico.

Click here for the full copy of the SEC Advisory on Organico Agribusiness.

SEC advisory organico

A quick check on Organico website‘s FAQs mentions this:

Is it OAVC legitimate?

Presently, we are processing all our legal documents like Business Permits, SEC Registration, BIR, and any other government agencies that require to us to obtain.

Personal Disclosure (PD): We don’t have existing investments with Organico.

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FARMON

To be fair, SEC also issued a similar advisory on FarmOn in 2016, basically same contents on not being registered with SEC, and not being allowed to offer investments. Caveat emptor as always every Juan.

Click here for the full text of the SEC Advisory on FarmOn.

Meanwhile here is the reply from the FarmOn website:

Important announcement about the inquiries on the SEC registration of FarmOn.ph.

FarmOn.ph is not a corporation which is not needed to be registered to SEC. Instead it is a sole proprietorship which is registered to DTI. We have license and business permits to operate and legal papers and documents registered to DTI. FarmOn.ph has existing 45 hectares farm located in Isabela and Quirino Province, including the office, which we wanted all investors to visit.

Fair enough? Indeed, being a sole proprietor does not need SEC registration (1 point for FarmOn), it just needs DTI registration which they claim they have. Unfortunately, upon clicking on the link to their permits, it goes to the home page so the link must be broken.

Nonetheless, I don’t think being DTI registered will allow the sole prop business to solicit investments (anyone from DTI care to clarify?) I tried checking DTI’s website but I cannot find anything about investments. All I know is that it is always SEC telling the pubic that a certain entity is not allowed to solicit investments.

Well at the end of the day, it is the responsibility of every Juan to decide where they want to risk their money. The government just functions as a big brother to those who need it. But your money, your rules, your gains and losses.

We sent a message to FarmOn to prominently display their permits but we have not received a reply as of this time.

PD: We do have exposures in FarmOn.

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PHILCROWD

Upon checking PhilCrowd’s website, it seems it is under maintenance. But from what I know, PhilCrowd is registered as a cooperative (hence not supervised by SEC, but by CDA instead) and being a cooperative means it is allowed to accept the public’s money such as deposits and invest it in various vehicles. Nonetheless, since the website is down, there no way to check at the moment the documentations. Will this suffice? Is this a good workaround for Organico and FarmOn if ever?

A quick Google search on “SEC advisory on PhilCrowd” yields no relevant results.

PD: We do have exposures in PhilCrowd.

(23Sep2018 Update: SEC has also issued an advisory on PhilCrowd. Read more here.)

CROPITAL

According to their website, Cropital is SEC registered. Click here.

The SEC name inquiry is down at the moment to verify this though. Nonetheless, a quick Google search on “SEC advisory on Cropital” yields no relevant results

PD: We have no exposures in Cropital.

WHAT TO DO NOW?

The patanim and paiwi practice has been in place in our country for the longest time, albeit limited to relatives and neighbors in the provinces so the concept behind the crowdfunding is not totally new. It is more of the medium of distribution that is new. Whereas before it is more of word of mouth among relatives and acquaintances, now it is through the internet, through technology, making it easily accessible and available to a greater number of potential investors. It is not different from how Uber and AirBnb bridges the demand and the supply, acting as the intermediary.

Every Juan who shall invest in these crowdfunding platforms has the right to ask for their permits and registrations.

Does this mean those with no SEC licenses are not legit? Well technically. For now. But, there’s a but, most of them say that their documentations are in the works already. Hopefully, it comes out fast. Hopefully, the crowdfunding groups get to straighten out their documentations. Hopefully, they get to regularize the lacking permits asap.

For now, proceed with caution. Or avoid them completely. No one is forcing you to invest in these. There are other investment options out there. This is just one of the many.

Do you pull out your investments? Up to you. Ever since, we advised every Juan to just put an amount they can afford to lose, especially since this is a relatively new field and that firm government regulations are not yet in place for crowdfunding, as we reminded every Juan here. Do not put all your life savings in these! Don’t put all your eggs in one basket!

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Business registration can be tedious (though it’s not an excuse, it can be a hindrance). The government has initiatives to make business registration as easy as possible. But truly, in this country, there are many good businesses out there that are not properly registered, or at least not yet. Usually start-up businesses tend to operate first, then get registered once operations become sustainable.

For us, we’re managing our existing exposures. We think these crowdfunding platforms are great, they are the future. They enable small players to have more investment options. Meanwhile, we cannot fault SEC for doing their jobs in protecting the public’s money. The key is for SEC and the crowdfunding groups to work hand-in-hand on how they come into an agreement the soonest possible time — how to regulate crowdfunding because that is where we are headed. It’s the future. Financial technology a.k.a. fintech folks!

This is like LTFRB being kinda late in managing and knowing how to regulate the TNVS – the future of transport, hence the recent mess and brouhaha in Uber, Grab, etc. Our government is trying to play catch up. Our SEC also has to do a better job in expediting and promulgating the proper rules and measures to ensure that crowdfunding groups do a good job in growing and protecting Juan’s money, while funneling economic activity and funds to sectors that are in dire need of financing – agriculture mostly.

Caveat emptor every Juan. Do your due diligence and research. Manage your exposures. And pray hard that SEC finalizes the rules and framework for crowdfunding soon! Goodluck out there!

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7 Responses

  1. Admin says:

    Found this on reddit. Views not ours but valid points raised. If anyone wants to explain for the other side, feel free to do so here.

    QUOTE

    I have seen several mentions of Organico Agribusiness Ventures in this sub, facebook, and blogs. Many people have pointed out that it is suspicious, but to my knowledge no one has come out and explained that it definitely is a Ponzi scheme. That is the point of this post.

    Organico offers the following proposition: for 3600, you invest in one piglet. After 90 days, Organico gives you 6000 for the fattened pig, a 67% return in just three months. That is equivalent to a 672% annualized return, which would make it basically the best business in the world.

    There are just a few problems with this business model.

    First of all, 90 days is too short to raise a hog. It takes closer to four months. During that time the pig will consume about 4000 worth of feed. Then there are vaccines, veterinary expenses, labor, energy, and depreciation of fixed assets. The piglet itself is around 2000. Add on 5-10% to account for mortality, since pigs get sick easily and about that percentage will die before reaching market weight. We’re up to well over 6000 at least in expenses, probably more like 7000, so how are they doing it with only 3600?

    According to their website they only started in 2017. A large pig farm requires a significant capital investment. There are facilities to build and equipment to buy. It takes several years to recoup those outlays, not a few months. An owner who earned a 25% annual return on capital invested would be doing very well in that business. How are they paying investors so quickly?

    Why do they need your money anyway? If they really own the most efficient and profitable piggery in history, why not invest their own money or that of a few private investors rather than going through all this trouble to raise cash from the masses?

    There is only one explanation that makes any sense. There is no profit from real operations. Money cashed out by old investors is coming from new entrants. In other words, it is a Ponzi scheme.

    But my friend/coworker already got a payout! It must be legit!

    That’s how Ponzi schemes work. Money from new investors goes to pay the old while the operator skims off the top. Participants will keep getting paid as long as the supply of new suckers increases fast enough. I guarantee they are not buying piglets and feed with your money. It’s going straight out to pay off previous investors and to the owner’s pocket. Then, all of a sudden, the payments will stop. Maybe they will claim an outbreak of swine flu wiped out the whole herd. Or when the government finally gets around to cracking down they’ll blame the regulators for spoiling everyone’s fun. Either way, it’ll be “Sorry guys, bad luck. Goodbye.” I don’t know how long it will take. It could be next week or six month or a year, but it will come to a bad end for certain.

    They’re registered with the SEC!

    Anyone can register a corporation with the SEC, DTI, and BIR. You just file some paperwork. It’s a little bit of a bureaucratic hassle, but you can just hire an agent to take care of the whole process. Organico appears to have incorporated as just an ordinary pig farm. But an ordinary pig farm is not allowed to solicit investments, even if incorporated. Getting a license to offer securities to the public is a completely separate application. Organico has not submitted that application. They never will, because then they would have to file audited financial statements and publish a detailed prospectus as required by the Securities Regulation Code.

    They have real physical offices you can visit!

    That’s a lot of extra overhead for a pig farm, don’t you think? How can they afford the expense of commercial office space? Does anyone else remember the gold trading pyramid craze of 2015? EmGoldex had nice offices in prime locations too. I think the one in my area is now a laundromat.

    According to a cursory Google search, the owner’s name is Cerrone Roial Posas. He has a history of scammy MLM schemes going back years. Previous ventures include Roial Enterprises and Bitworks, which was investigated by the NBI in 2016 for also being a Ponzi scheme. His last scam collected funds to put up a poultry farm, which ended because of “avian flu.”

    Anytime someone mentions Organico, tell them it is a Ponzi scheme. If you really want to be a hero, invest the minimum amount with the express purpose of documenting everything and filing a complaint with the SEC. They are offering securities to the public without a license. That is highly illegal.

    If you work as an agent for Organico, you are committing a crime by marketing an unauthorized security. Let’s face it, the owners are probably going to get away scot-free. They’ll get out with enough money to flee the country or just pay off the right officials. It’s the people at the bottom who are at risk of punishment. Ask yourself, are you making enough money to bribe the NBI or run away to New Zealand when this thing ends?

    Finally, for everyone who says, “I know it’s risky, so only invest what you can afford to lose,” that’s not the rule for Ponzi schemes. The rule is: Do Not Put Your Money into Ponzi Schemes! There is no business behind it. You are effectively letting someone rip you off in the hope that you will be allowed to rip off the next guy. This is not only stupid, it is immoral. To be clear, if you participate in a Ponzi scheme, and you’re not just too dumb to know better, you are being a bad person.

    -Source:

    https://www.reddit.com/r/phinvest/comments/aev98r/organico_is_a_ponzi_scheme/

    END QUOTE

  2. Admin says:

    Live Chat Transcript 03/21/2019

    Cam: Hi Geri! Ever heard of G-Harvest Inc. – some type of crowdfunding for copra. Is this a legit one?

    Geri: We havent heard of that cam. Pero nauuso na ung mga crowdfunding na ganyan either legit or not. Ang dami na nila ngayon.

    Cam: They promised roi of 13-17% for 4 months and 23-27% for 6 months too good to be true huh. 10,000 per slot for copra

    Geri: Hmmm sometimes it can be doable like in Farmon before. That range can be achieved but not guaranteed. Just not sure if for copra it can be that profitable.

    Cam: Oh ok.. will give it a try then

    Geri: But be careful. Only invest a small amount if u really want to try it. Amount you can afford to lose. If they’re using inc in their name they should be sec incorporated at the very least. But it doesn’t automatically mean they can solicit investments. So conduct further research.

    Cam: Noted Sir. Thanks for the advice 🙂

  3. Admin says:

    Live Chat Transcript 3/20/2019

    Deo: How do I know if a certain investment scheme – like organico (hog raising) is legit or not? They are registered in sec

    Geri: extra care po even if may SEC pa sila. conduct more research or if possible ocular but still these are no guarantees. if u want to try invest something u can afford to lose. maybe check as well how they will make use of ur investment. meron kasi ndi registered pero good intentions naman. meron din itatakbo lang pera nyo if realistic ung return and reasonable baka worth a shot

    Deo: I am looking at higher risk now to explore it. And yes the investment is not big. Something I can afford to lose
    Compared to farmon di hamak mas malaki returns sa kanila

    Geri: we wrote about them about the sec warning. then someone commented here about the recent sec registration and how they don’t solicit investments. parang paiwi system kasi sila. guaranteed return ba ung organico? I cant recall na

    Deo: I am thinking of investing in both sa livestock and compare actual returns.Yes return is guaranteed. 3600 investment per head and then 2400 return after3 months. Farmon only shows the low end

    Geri: wow ang laki ah. tapos guaranteed pa. kaya enticed na enticed mga tao though sa baboy kaya naman tlaga kumita ng ganyan but it’s not guaranteed but I guess organico is taking the risk to guarantee the investments

    Deo: So many ovserseas investor. I am planning to invest but like you said to be cautious. Thanks

    Geri: Yup. just keep your exposure to the minimum you can lose. and always be mindful that if the investment fails, you may not have a recourse. better yet if kumita ka sa first try, reinvest the earnings only, pull out the capital. that way wala ka losses. if ever you just lost your earnings but you’re not worse off from where you started

    Deo: This is the plan. Thanks. You’ve been very helpful.

    Geri: glad to be of help. 🙂

  4. Fred Limchui says:

    I got a copy of Organico’s SEC Certificate of Incorporation registered May 8, 2018, not sure if it’s legit. I don’t know if it’s okay to post their Company Registration Number here though…

    • Admin says:

      That’s a good update. I wonder if the SEC also granted organico the permit to solicit investmensts. Maybe you can mask the registration number then try to upload here?

      • Fred Limchui says:

        I was told that they don’t solicit investments as their business model is angled as “buy-and-sell”. Meaning, the “investor” buys a piglet (representation) and the company sells them.

        Here’s the SEC paper: https://ibb.co/nsDXGo

        • Admin says:

          Well that’s a creative way of putting it. Haha. I leave it up to the government and the crowdfunding to settle this once and for all. As always, caveat, diversify, don’t put all your eggs in one basket. 🙂

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