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SEC says Kapa is ‘biggest investment scam’ in the Philippines

Photo from Kapa-Community Ministry International, Inc, Facebook

THE Securities and Exchange Commission (SEC) has warned the public anew against putting their hard-earned money in religious group Kapa-Community Ministry International, Inc. (Kapa), saying it is the biggest investment scam in the Philippines in recent history.

SEC Chairperson Emilio B. Aquino, in a press conference on Monday, June 10, 2019, called Kapa a case of an affinity fraud, wherein a certain leader or founder takes advantage of the faith and trust of the members.

“Kapa is running a scam. Its financials do not show that it has the capability to deliver except to rely on new investors to bring in their money. We have to put a stop to it, otherwise there will be more victims,” Aquino said.

Assuming it has already almost 5 million members as of June 8, 2019 as claimed by Kapa founder Pastor Joel Apolinario, Aquino said Kapa is even bigger than the Aman Futures scam in 2012 which defrauded around 15,000 people in the Visayas and Mindanao for P12 billion.

Like other Ponzi schemes perpetrated by religious leaders, Aquino warned that Kapa - which started in Bislig City, Surigao del Sur six years ago but now has offices in several key cities in Mindanao, Visayas and Luzon - will eventually collapse.

“Ultimately, it will collapse. It is inevitable. As sure a the sun will rise in the east tomorrow, they will never be able to sustain that kind of business, especially with the 30-percent return per month for life,” Aquino said.

A Ponzi scheme is a fraudulent investing scam that promises high rates of return at little risk to investors. Payouts for investors are taken from funds put in by the new investors.

Aquino said it is a kind of thievery, where money is taken from Juan to pay Pedro.

In the case of Kapa, members are enticed to make a “donation” of a minimum of P10,000 and maximum of P2 million, with a promised monthly dividend equivalent to 30% of the “donation” for life.

This proposition already raises a red flag because donations do not have returns in the first place Aquino said.

“They have presented an unrealistic return of investment, which is ridiculously high, and the scheme is mathematically unsustainable,” Aquino said.

SEC has found that Kapa does not have substantial assets. In its financial statement covering the year 2017, Kapa listed assets of only P465,000 and said it netted only a little over P5,000.

Its businesses are mostly startups that were registered with the Department of Trade and Industry only in 2018 and 2019 and “would not be really able to deliver these promised returns”, Aquino said.

A school, Aces Tagum College, that Kapa has allegedly taken over made less than P1 million in 2018 while a hospital, Tagum Doctors Hospital, earned only around P5 million. A fishing venture that Apolinario claims to earn P4 million a day would make only about P1.5 billion a year.

Assuming Kapa already has almost 5 million members and assuming each of these 5 million made a “donation” of P10,000, Aquino said Kapa would have at least P50 billion. A 30% return means Kapa needs at least P15 billion for the monthly payouts. In one year, this amounts to P180 billion.

Kapa's assets and the reported income of its businesses are “way, way short” of this amount, Aquino stressed.

SEC is set to file criminal charges against Apolinario, other Kapa officers and others helping propagate the scheme for violation of the Securities Regulation Code and the Revised Corporation Code of the Philippines. Aquino also urged Kapa members to file charges against Kapa.

Aquino said Kapa has been constantly defying SEC orders since March 2017 and got a boost when a Regional Trial Court in General Santos City issued a preliminary injunction against a cease-and-desist order (CDO) issued by SEC.

Aquino stressed, however, that no court below the Court of Appeals can issue an injunction against SEC and prevent the corporate regulator from carrying out its functions, based on Section 179 of the Revised Corporation Code.

SEC first issued an advisory against Kapa on March 22, 2017. Another advisory was issued on October 4, 2018. A CDO was issued on February 14, 2019 and on April 3, 2019, SEC revoked Kapa’s Certificate of Registration.

“There is no such thing Kapa-Community Ministry International existing, as far as SEC is concerned. Its Certificate of Registration has already been revoked for violations of the Securities Regulation Code and the Revised Corporation Code. If they wish to continue operations, it no longer has legal basis to operate,” Aquino said.

The Philippine National Police and the National Bureau of Investigation are also building up a case against Kapa. Search warrants issued against Kapa were implemented in key cities nationwide on Monday, June 10, 2019. (Ventures Cebu)

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