SEC Shows Investors What a Cryptocurrency Scam Looks Like

17 May, 2018, 11:46 | Author: Regina Silva
  • SEC Shows Investors What a Cryptocurrency Scam Looks Like

Taking a look at the ICO's website, the campaign has all the trimmings of a sketchy coin offering.

In 2017 the regulator established a dedicated cyber unit to combat fintech and cyber-related crimes.

The Securities and Exchange Commission (SEC) Office of Investor Education and Advocacy has created a bogus website to highlight the scam riddled initial coin offering (ICO) industry.

The SEC had its own presence at the conference. However, the U.S. agency is not content with dealing with fraudulent ICOs after the fact and instead hopes to educate investors to prevent such scams being successful in the first place. Check. Celebrity endorsements? Check.

HoweyCoins says it combines the "blockchain and travel" to offer ICO participants massive discounts on travel expenses. The agency billed "HoweyCoin" - an ode to the Howey Test - as "the newest and only coin offering that captures the magic of coin trading profits AND the excitement and guaranteed returns of the travel industry".

SEC Chairman Jay Clayton explained, "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".

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According to the HoweyCoin website, most travel businesses "require processing, centralized currency, and most importantly, nickel and dime fees that add up to literally billions". 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. "But fraudulent sites also often have red flags that can be dead giveaways if you know what to look for". This is a recipe that many fraudulent ICOs use - and HoweyCoins mimics well.

Lesson one: If it sounds too good to be true, it probably is.

While many within the crypto world regularly express their discontent with regulatory bodies and see them as stifling the industry, this latest move from the SEC will no doubt serve as an important warning to would-be investors, and might at least raise a smile from the regulator's detractors. 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.

However, the fun ends once prospective investors click the "Buy Coins Now" link, which instead directs them to an SEC investor education website that provides information on how to identify and avoid common ICO scams.

The SEC's spoof has been well received even by entrepreneurs in the crypto space who are normally wary of regulatory bodies.

If ICOs come under securities law, ICO traders must be vetted and offering companies and advisors need to have a strong, thorough knowledge of how to conduct securities events.

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