How Are Cryptocurrency Schemes Promoted by Influencers Regulated?
Introduction
Social media influencers increasingly promote cryptocurrency platforms, digital asset products, and investment programs to Philippine audiences. A post, livestream, referral link, or paid endorsement may appear to be ordinary advertising, but it can create regulatory exposure when it solicits investments, promises profits, or directs the public to an unregistered platform.
The legal concern is not limited to the influencer’s receipt of a commission. Liability may arise when the influencer knowingly or actively helps offer, sell, solicit, or promote an investment product without the required registration or license. The applicable consequences may include administrative sanctions, cease-and-desist orders, disgorgement, and criminal prosecution, depending on the facts and the law violated.
What Laws Govern Cryptocurrency Investment Promotions?
The principal statutory provisions include the Securities Regulation Code, or Republic Act No. 8799, the Financial Products and Services Consumer Protection Act, or [Republic Act No. 11765 (2022)](#L1.3), and, where the conduct involves deceptive online activity or unauthorized transfers, other financial and cybercrime laws.
Republic Act No. 11765 defines investment fraud as deceptive solicitation of investments from the public. The definition expressly covers Ponzi schemes, arrangements where returns are sourced from later investors’ contributions, boiler-room operations, and the offering or sale of investment schemes without an SEC license or permit, unless the securities or transaction are exempt.
Section 11 of Republic Act No. 11765 makes investment fraud unlawful and subjects offenders to the penalties under Section 73 of Republic Act No. 8799, as well as the administrative sanctions provided under the consumer-protection law. ([Republic Act No. 11765 (2022)](#L1.21))
When Does a Cryptocurrency Product Become a Regulated Investment?
A cryptocurrency or digital asset is not automatically a security merely because it is described as a token or virtual currency. The relevant inquiry is the substance of the arrangement, including whether purchasers contribute money or assets to a common enterprise with an expectation of profits to be derived primarily from the efforts of others.
Features that may indicate an investment scheme include:
- fixed or unusually high promised returns;
- passive-income representations requiring little or no activity by the purchaser;
- pooling of investor funds for trading, staking, mining, lending, or other activities;
- returns funded by later investors rather than genuine business income;
- referral commissions or rewards for recruiting additional participants; and
- claims that the product is guaranteed, risk-free, or approved by a government agency without proof.
The Securities Regulation Code generally requires securities offered or sold to the public in the Philippines to be registered unless an exemption applies. The quoted statutory rule provides that securities may not be sold, offered for sale, or distributed in the Philippines without a registration statement filed with and approved by the SEC, subject to applicable exemptions. (Quoted authority discussed in Standard Chartered Bank v. Senate Committee on Banks, Financial Institutions and Currencies, G.R. No. 167173, 2007.)
Can an Influencer Be Liable Without Receiving Investor Funds?
Yes. Direct receipt of investor money is not always necessary. A person may incur liability when the person actively solicits, refers, or provides information to potential investors with the purpose or effect of closing a sale of unregistered securities, particularly when the person is not registered as a broker, dealer, or salesman.
The Supreme Court held that a person need not be a signatory to the investment contract to be liable under Section 28 of Republic Act No. 8799. Active solicitation, referral, or provision of information that effectively brings about the sale may be sufficient; the absence of a formal agency agreement or direct receipt of funds does not automatically defeat liability. (Securities and Exchange Commission v. Santos, G.R. No. 195542, 2014.)
Accordingly, an influencer’s activities may be examined as a whole. Repeated endorsements, personal assurances, referral codes, instructions on how to deposit funds, claims about expected returns, and follow-up communications with prospective investors may demonstrate participation beyond mere expression of opinion.
What Conduct May Expose Influencers to Sanctions?
Regulatory exposure may arise from several types of conduct:
| Conduct | Possible legal concern |
|---|---|
| Promoting an investment platform without confirming its authorization | Offering or selling an unregistered security or investment scheme |
| Promising fixed, guaranteed, or extraordinary profits | Misrepresentation or investment fraud |
| Using referral links to recruit investors | Active solicitation or participation in the sale |
| Representing that the SEC or another regulator approved the product without proof | False or misleading regulatory representation |
| Promoting a Ponzi or pyramid arrangement | Investment fraud and possible criminal liability |
| Continuing promotion after a regulatory warning or order | Additional administrative or criminal exposure |
The Financial Products and Services Consumer Protection Act authorizes financial regulators to enforce consumer-protection standards, conduct market-conduct surveillance, adjudicate covered disputes, and impose administrative sanctions. Depending on the violation, sanctions may include orders to stop the conduct and disgorgement of profits or gains obtained from the unlawful activity. ([Republic Act No. 11765 (2022)](#L1.3))
What Are the Penalties for Investment Fraud?
Section 11 of Republic Act No. 11765 directs that investment fraud is penalized under Section 73 of Republic Act No. 8799, in addition to administrative sanctions under Republic Act No. 11765. The precise penalty depends on the offense charged, the accused’s participation, the amount and extent of the fraud, and the applicable statutory provisions.
Administrative consequences may include cease-and-desist orders, suspension or revocation of authority, monetary penalties, disgorgement, and other measures authorized by law. A person who promotes or participates in the sale of securities may also face criminal proceedings if the evidence establishes the elements of the offense and the person’s specific participation.
In criminal cases involving securities violations, general allegations are insufficient. The prosecution must prove beyond reasonable doubt both the commission of the offense and the accused’s specific participation. Mere association with a company or generalized conclusions about involvement do not, by themselves, establish criminal liability. (People of the Philippines v. Petralba, et al., G.R. No. 137512, 2004.)
How Does the SEC Respond to Unregistered Online Promotions?
The SEC may investigate online promotions, identify persons involved in the offer or sale, issue regulatory orders, and transmit evidence for criminal prosecution when warranted. The SEC’s statutory authority includes issuing cease-and-desist orders to prevent fraud or injury to the investing public and referring possible violations to the Department of Justice. (Government Service Insurance System v. Rosete, et al., G.R. No. 183905, 2009.)
Online publication does not place the activity outside Philippine regulation. A promotion may be relevant to Philippine securities regulation when it is directed at Philippine residents, uses Philippine payment channels, solicits investments in the Philippines, or otherwise forms part of an offering made to the Philippine public.
Cryptocurrency promotions may also create anti-money-laundering concerns. The amended anti-money-laundering rules recognize virtual asset service providers and impose compliance obligations on covered persons, including requirements concerning beneficial ownership, risk assessment, and suspicious transaction reporting. (2018 Implementing Rules and Regulations of Republic Act No. 9160, as amended.)
What Facts Distinguish Legitimate Advertising From Illegal Solicitation?
Not every discussion of cryptocurrency is an illegal securities offering. Educational commentary, personal opinions, and general market analysis may be treated differently from a communication intended to induce the public to invest in a particular scheme.
The distinction depends on the substance and purpose of the communication. Relevant facts include whether the influencer:
- received compensation, tokens, commissions, or referral rewards;
- directed followers to a specific platform or wallet;
- made representations about profits, safety, approval, or guaranteed returns;
- answered questions or gave instructions designed to complete investments;
- recruited others into a continuing chain of participants; and
- knew or should have known that the platform lacked the required authority.
A disclaimer such as “this is not financial advice” is not conclusive. It may be considered with the other evidence, but it does not erase affirmative misrepresentations, active solicitation, or participation in an unregistered investment scheme.
What Should Influencers Verify Before Accepting a Cryptocurrency Promotion?
Before publishing any endorsement, an influencer should obtain documentary proof of the promoter’s identity, corporate registration, regulatory authority, product classification, and permission to solicit Philippine investors. Registration with the SEC as a corporation does not necessarily mean that the entity is authorized to offer securities or operate a financial product.
The influencer should also ask for written disclosures concerning compensation, referral arrangements, investment risks, withdrawal conditions, custody of funds, and the identity of the entity receiving investor money. Claims of SEC approval, licensing, or government endorsement should be independently verified rather than repeated from promotional material.
Promotions should not describe an investment as guaranteed, risk-free, or certain to produce a stated return unless the representation is legally and factually supportable. Influencers should preserve contracts, disclosures, communications, and copies of the materials on which they relied.
What Should Investors Do When a Platform Appears Suspicious?
Investors should preserve screenshots, transaction records, wallet addresses, bank details, referral messages, promotional videos, and communications with the promoter. They should avoid sending additional funds merely to unlock withdrawals, pay taxes, or recover supposed profits without independent verification.
Reports may be made to the appropriate Philippine regulatory and law-enforcement authorities. Where the scheme involves bank accounts, electronic transfers, virtual assets, or suspected laundering of proceeds, the transaction history and account information may be material to the investigation.
Final Observations
Influencers who promote cryptocurrency products to Philippine audiences should treat investment endorsements as regulated communications when they solicit funds, promise returns, or direct the public to a particular platform. The absence of a formal employment relationship with the platform, and the fact that the influencer never personally received investor funds, do not necessarily prevent liability.
The safer course is to verify authorization before publication, disclose compensation, avoid unsupported profit claims, maintain records, and obtain legal advice when the product’s classification is uncertain. A promotion that appears to be ordinary social-media content may become evidence of active solicitation when it helps complete the sale of an unregistered investment product.
About Nicolas and De Vega Law Offices
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