The SEC’s spoof ICO launch, HoweyCoins website breaks down the red flags of fraudulent fundraising to educate potential victims.
The Securities Exchange Commission, a US regulatory branch charged with investigating fraudulent ICOs, has created their own ICO web page to show potential investment victims the obvious signs of scam offers. HoweyCoin is presented as a way to invest in the luxury travel market and the ICO promises a 25% discount to gold level investors through the site as reported in the The Wall Street Journal.
ICOs are a popular but still unregulated way for startups to raise funds which according to the SEC have generated $12 billion in revenue so far in 2018. They are also a proven way for scammers to get to non-savvy investors who want to tap into the rumored high returns possible with cryptocurrency.
The SEC’s fake HoweyCoin takes its name from the 1946 four-part Howey test established to determine what qualifies as a security. In the ongoing process of regulating cryptocurrency, the SEC has been recommending that exchanges use this test as a guide for whether a coin falls under the existing securities regulations or not.
In 2017 the regulator established a dedicated cyber unit to combat fintech and cyber-related crimes. Since it’s creation the unit has been actively focusing on ICOs as the largest potential threat to investors.
The HoweyCoin site seems as legitimate as any other ICO landing page. It features a countdown clock showing how much time is left to get in on the discounts and outlines different levels of investment against images of tropical islands and foaming champagne. When clicking through there is even a white page and a list of (fake) celebrity investors but when the Buy Coins Now button is clicked the user is brought to a page outlining the scam.
Once on the Investor.gov page, the warning signs of a fake ICO are highlighted in red and include particulars like celebrity endorsements, high returns, regulatory compliance and options to pay with a credit…