Faux ICO hopes to educate those easily drawn to money making schemes on just how easy it is to be fooled.
The United States’ federal Securities and Exchange Commission has set up a website, HoweyCoins.com, to mimic a bogus coin offering and educate investors. The website – which regular readers of CNR will probably know borrows its name from the long-standing US legal test to determine whether an offering counts as a security, and should thus adhere to the rules laid down by the SEC for the sector – has the look and feel of many ICO sites, indeed its creators have even gone as far as creating fake endorsees and a whitepaper and plenty of faux-technical content that could attract a casual investor. The SEC say its team, who also appear under aliases as the HoweyCoins staff, were able to build the website in-house in very little time, which demonstrates just how easy it is for someone to create a scam opportunity.
Anyone who’s read a lot of these kind of sites – or who took more than a few minutes to undertake some checks – would probably spot the ruse pretty quickly, but it’s unlikely that someone like that is the target. However, anyone who should stumble across it and decide to click “Buy Coins Now” after being impressed by the testimonies of its fake Twitter stars @McWhortle, @realdrummerstar and @boxingchamp1934 will be led instead to investor education tools and tips from the SEC and other financial regulators.
In a statement, 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 our Main Street investors,”said SEC Chairman Jay Clayton. “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.”
“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.”