SEC Launches Scam ICO Website To Educate Investorsbr>
The US Securities and Exchange Commission (SEC) has created a mock initial coin offering (ICO) website to educate investors about the scam-riddled ICO industry.
The mock site, HoweyCoins.com, mimics a bogus ICO project and touts an all-too-good-to-be-true investment opportunity. The site includes a complex white paper, promises of guaranteed returns, a countdown clock showing how long you have left to get in on the deal, and a “Meet the Team” section with SEC employees posing as blockchain developers.
“Combining the two most growth-oriented segments of the digital economy, blockchain technology and travel, Howeycoin is the newest and only coin offering that captures the magic of coin trading profits AND the excitement and guaranteed returns of the travel industry,” the mock SEC website reads, “Howeycoins will partner with all segments of the travel industry (air, hotel, car rental, and luxury segments), earning coins you can trade for profit instead of points.”
The agency uses a bait and switch to guide investors along to educate themselves about the pitfalls of investing in ICOs. Anyone who clicks on “Buy Coins Now” will be redirected to a page that states: “If You Responded To An Investment Offer Like This, You Could Have Been Scammed – HoweyCoins Are Completely Fake!” The page highlights red flags that investors should look out for, including claims of high returns, celebrity endorsements, claims of SEC-compliant, and pump-and-dump scams.
The SEC said the agency was able to build the HoweyCoins website in-house in very little time, which demonstrates just how easy it is for someone to create a scam opportunity.
“Fraudsters can quickly build an attractive website and load it up with convoluted jargon to lure investors into phony deals,” said Owen Donley, Chief Counsel of the SEC’s Office of Investor Education and Advocacy, who doubles as “Josh Hinze” on the HoweyCoins website. “But fraudulent sites also often have red flags that can be dead giveaways if you know what to look for.”
SEC Chairman Jay Clayton said 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 main street investors.
“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,” Clayton said. “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.”