The Cagayan Economic Zone Authority, the government agency behind the so-called “Crypto Valley of Asia,” said it froze all registered financial technology licensees until mid-2020 following an alleged “investment scam” and the dubious hiring of undocumented Chinese nationals by CEZA-registered companies.
CEZA spokesperson and fintech and cryptocurrency business officer Mike Gerald David said the scam allegedly perpetrated by Golden Millennial Quickpay Inc. Ltd. was being investigated by a tripartite body composed of the Philippine National Police, the National Bureau of Investigation and the Bureau of Immigration.
“The investigation is looking at how the alleged scam was done. Apparently, as an exchange, there was no way it can divert investments. So we are also investigating the service provider and the regular license holders under GMQ,” he said.
GMQ faces the cancellation of its offshore virtual currency exchange or OVCE license if found guilty of fraud. Its authorized service provider Grapefruit Service Inc. was also under fire amid the scam report. Grapefruit is the only Filipino entity involved in the operations of GMQ.
Authorities earlier arrested at least 277 foreign employees working at GMQ in Ortigas Center upon a tip from the Chinese Embassy in Manila.
GMQ was one of the 25 registered principal licensees with the capability to trade virtual currency. A principal licensee can designate as many as four fintech companies as subordinates. CEZA said of the 25 principal licensees, only GMQ was actively operating its own exchange while the two others―Liannet Technology Ltd. and Asia Premier International Ltd.―were still integrating their processes.
CEZA said 15 regular license holders also successfully registered with the agency.
CEZA said GMQ’s license as an OVCE was suspended on Sept. 12 after reports of the so-called scam surfaced.
David said CEZA would intensify its monitoring and audit control to further strengthen regulatory measures to protect the Philippines as a fintech hub.
“We decided to prohibit not only GMQ but all registered OVCEs from operating until the fintech hub building in CEZA is ready to accommodate these companies in mid-2020. We see this as a preventive move to deter other fintech companies from doing fraudulent activities. Once they are all gathered in a single building, it will be easier for us to monitor their activities,” he said.
CEZA is also investigating the alleged bloated labor force of GMQ that reached more than twice the official alien workers submitted by the company to CEZA.
The Bureau of Immigration said of the 277 foreign employees working at GMQ, only 106 were officially employed with corresponding permits and visas as attested by CEZA.
CEZA so far endorsed more than 1,000 visas and work permits for foreign workers for all industries registered with the agency. The biggest employers are the interactive gaming licensees which are the equivalent of POGO operators of the Philippine Amusement and Gaming Corp.