SEC Office of Investor Education Creates Mock Initial Coin Offering ""

Marco Green
May 17, 2018

The US Securities and Exchange Commission (SEC) said on Wednesday that the new spoof website, dubbed HoweyCoins, is a mock ICO created to "educate investors about what to look for before they invest in a scam". 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.

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

"We embrace new technologies, but we also want investors to see what fraud looks like", SEC Chairman Jay Clayton said, noting that the rapid growth of the ICO market has been "fertile ground for bad actors".

"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.

The SEC's spoof ICO launch, HoweyCoins website breaks down the red flags of fraudulent fundraising to educate potential victims.

The HoweyCoins site hits on several tell-tale signs of a scam. Check. An anxiety-inducing countdown clock?

SEC Launches its Own Fake ICO as Warning to Investors
The SEC Has An Opportunity You Won't Want to Miss: Act Now!

The SEC on Wednesday launched a parody website mocking ICOs, complete with a (fake) eight-page whitepaper, (fake) celebrity endorsements, and (fake) team working on the ICO.

While those attributes don't necessarily mean the offering is bogus, it's wise to be aware - and skeptical.

HoweyCoins was so named as a reference to the Howey test, which is used to determine whether or not a transaction is an investment contract.

Okay, that's not actually true, but the agency has constructed a clever campaign meant to teach investors how to identify ICO scams - and troll the fraudsters who continue to operate them.

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". Its decision guides the definition the regulator uses to this day in determining what constitutes a security: "a person invests his money in a common enterprise and is led to expect profits exclusively from the efforts of the promoter or a third party".

ICOs are usually offered for a fixed time, and in return for investors handing over standard cryptocurrencies including Bitcoin (BTC) and Ethereum (ETH), they are given a form of branded cryptocurrency token. The webpage is an in-house SEC project they were able to construct in relatively little time.

Other reports by Click Lancashire

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