The Securities and Exchange Commission en banc denied the appeal of businessman Joseph Calata to lift the cease and desist order against his four firms engaged in selling unregistered cryptocurrency in the forms of Krops Tokens or KropCoins.
The SEC also made permanent the cease and desist order against Black Cell Technology Inc., Black Sand Capital Inc. and Black Cell Technolgy Limited and Krops.
“Krop Tokens/and or KropCoins are being offered and/or sold within the Philippines through the joint effort of respondents,” the corporate regulator said.
The SEC said in an order dated March 2 that it rejected the arguments raised by Calata-owned firms that the corporate regulator had no jurisdiction over them because Krops was a software application owned and maintained by Black Cell HK, a company incorporated in Hong Kong.
“The CDO does not restrain Black Cell HK from owning and maintaining Krops as an application. What the CDO restrains is the act of publicly offering and selling of securities in the Philippines through initial coin offering of Kropcoins,” the SEC said.
“Respondents are attempting to evade an obligation to register with the commission by claiming that that initial coin offering is the sold act of Black Cell HR. Piercing the corporate veil is thus proper and the respondents may be held liable,” it said.
Calata group said Kropcoins were not securities but a primary medium of exchange where a holder of Kropcoins could use the token to purchase commodities within Krop ecosystem.
The SEC, however, said Krop Tokens and KropCoins satisfied the description of “securities” under Section 3.1 of the Securities Regulation Code.
“The terms commercial enterprise or profit making venture as well as common enterprises are descriptive of Krops, an unincorporated ‘start-up’ company as shown by respondents’ own admission,” it said.
Black Cell claims to be the “world’s first agricultural marketplace crypto equity ICO.”