The U.S. Securities and Exchange Commission has built a fake ICO website in order to educate investors and hopefully protect them from fraud.
This week it launched HoweyCoin, which looks just like a standard ICO website, complete with a whitepaper, team and testimonials intended to replicate the ‘celebrity endorsements’ used by several fraudulent ICOs.
The Howey Coin, which is most likely named after the Howey Test for “all too good to be true investment opportunities.” Check out the website and everything looks just as you’d expect, but if you try to buy any HoweyCoins, you are re-directed to an SEC site that explains all the ‘red flags’ in the HoweyCoins site, which are “a mash-up of a number of different things we’ve seen — any particular fraud may be harder to spot than the red flags here. “
The SEC used the travel industry as the foundation of the ICO and points out that booking fees cost travellers a lot. The HoweyCoin platform says it has the solution: “HoweyCoins utilize the latest crypto-technology to allow travelers to purchase all segments without these limitations, allowing HoweyCoin users to buy, sell, and trade in a frictionless environment — where they use HoweyCoins to purchase travel OR as a government-backed, freely tradable investment — or both!”
Many of you will be able to see the problem immediately in the above statement; “government-backed” is surely one of them. But, if you don’t know what is happening in the crypto markets, and you are looking for a way to make money, you may just ignore this. HoweyCoin also claims to be SEC-compliant, which is another falsehood, and the SEC is concerned that too many ICOs are making the claim “to investors that they are regulated or meet the regulatory standards of a national securities exchange.”
It also offers extremely ambitious returns on investment: “We also forecast a minimum growth rate of between 7% to 15% annualized, making HoweyCoins attractive for long-term investment. In addition, HoweyCoins can serve as a GUARANTEED hedge against inflation and market loss.”
And it claims you can invest using your credit card, which as we all know by now is extremely unlikely, because most licensed and registered investment firms do not allow their customers to use credit cards to buy investments or to fund an investment account.
Finally, there is the word ‘pump’ in the mix. A ‘pump and dump’ scheme appeals to fraudsters because it creates a buying frenzy that pumps up the price of the stock and they sell their tokens at an inflated price.
Weeding out the fakes and frauds is an important part of strengthening the ICO ecosystem — HoweyCoins is a novel educational tool that could help.