HoweyCoins: The SEC’s Way to Say “Don’t Buy that ICO”
“The SEC Has an Opportunity You Won’t Want to Miss: Act Now!”, the title for an official press release for a fraudulent coin offering from the SEC reads.
That opportunity is HoweyCoins, “an all too good to be true investment” that “isn’t real,” the release admits. The fake ICO, pitched as a luxury travel currency, is the latest attempt by the SEC to deter un-savvy investors from poor investment choices. It’s name is in playful reference to the Howey Test, a metric used to determine whether or not an investment is deemed a security under the Securities Act.
Taking a look at the ICO’s website, the campaign has all the trimmings of a sketchy coin offering. It comes with wide-grinned pictures of team members with no bios, no LinkedIn profile links, and no discernible identity verification of any kind. In addition, it has a a pre-sale countdown clock, four tiers of early bird bonuses, and testimonies that promise 1% daily returns, a pledge made by many a fleeting scam. It even includes fake celebrity promoters (complete with their own fake Twitter profiles). One of these, @boxingchamp1934, appears to be poking fun at Floyd Mayweather, who endorsed a fraudulent ICO that exit scammed after raising $32mln. The project also comes with it’s own legit-looking whitepaper, as well.
If you attempt to sign up for the HoweyCoins mailing list to purchase tokens, you’ll be greeted with a page redirection and the following message:
“Welcome to Investor.gov, the Securities and Exchange Commission’s site designed for individual investors. We’ve recently seen fraudsters pretending to be involved in blockchain technology, initial coin offerings, and crypto-currencies – when really they are simply operating scams designed to take investors’ hard-earned money. We created the bogus HoweyCoins.com site as an educational tool to alert investors to possible fraud involving digital assets like crypto-currencies and coin offerings.”
The page then continues to outline the red-flags the SEC planted on the HoweyCoins’ site to demonstrate the false advertising practices that many scam projects employ to rope in investors. These include celebrity endorsements, promises of high returns, and ironically, promises that the ICO is SEC-compliant.
At the very least, the campaign is a novel attempt to educate investors of the widespread risks of investing in an unregulated market. It shows that the SEC is willing to take creative approaches to keep the American public away from bad investing decisions, even as other acts of deterrence have failed.
“The rapid growth of the ‘ICO’ market, and its widespread promotion as a new investment opportunity, has provided fertile ground for bad actors to take advantage of our Main Street investors,” SEC Chairman Jay Clayton is quoted in the HoweyCoins press release. “We embrace new technologies, but we also want investors to see what fraud looks like, so we built this educational site with many of the classic warning signs of fraud. Distributed ledger technology can add efficiency to the capital raising process, but promoters and issuers need to make sure they follow the securities laws. I encourage investors to do their diligence and ask questions.”
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