The Securities and Change Fee launched a spoof cryptocurrency web site on Wednesday to warn traders in regards to the dangers of taking part in “preliminary coin choices,” or ICOs.
The web site — referred to as “HoweyCoins.com” — mirrors advertising and marketing supplies revealed by precise cryptocurrency promoters. It features a countdown timer, guarantees of outsized funding returns, and even a “Meet the Staff” part with SEC staff posing as cryptocurrency builders.
When guests click on a button that reads “Purchase Cash Now!” they’re routed to an Investor.gov site that breaks down the spoof and descriptions how every aspect is usually used to trick unsuspecting traders in ICO schemes.
Initial coin offerings are a approach for upstart cryptocurrency companies to lift giant quantities of cash. In a typical ICO, inside traders are provided the primary probability to purchase a brand new cryptocurrency earlier than it hits the market.
HoweyCoins is a part of the SEC’s effort to fight an explosion of scams and securities fraud related to cryptocurrencies. The regulator is taking a multi-pronged method to client safety, educating the general public in regards to the dangers of unscrupulous ICOs whereas concurrently bringing enforcement actions towards and investigations of the worst offenders.
A press release from the SEC says the company “was in a position to construct the HoweyCoins web site in-house in little or no time, which demonstrates simply how straightforward it’s for somebody to create a rip-off alternative.”
“On the finish of the day, we’re by no means going to have the option litigate our approach out of funding fraud. It is going to come right down to investor schooling,” stated Lori Schock, director of the company’s Workplace of Investor Training and Advocacy.
The identify “HoweyCoins” is a reference to the Howey Test, a four-part authorized take a look at issued by the Supreme Courtroom in 1946 for figuring out whether or not an funding counts as a “safety.” Usually, if one thing passes the Howey take a look at, and is subsequently thought-about a safety, it’s topic to SEC regulation.
The SEC claims that most of the cryptocurrencies launched with preliminary coin choices in recent times go the Howey take a look at, and it has relied on this interpretation as a authorized foundation for its enforcement actions.
In 2017, the regulator established a devoted cyber unit tasked with combating monetary crimes and “cyber-related threats” to traders. The unit targets ICO scams in addition to frauds involving social media, the darkish internet and knowledge breaches.
However enforcement can solely catch dangerous actors after the injury has been carried out. As soon as misplaced, investor cash is usually extraordinarily tough to get well — even when the company is ready to efficiently shut down the rip-off.
In accordance with Schock, investor schooling can assist customers establish dangerous cryptocurrencies earlier than they lose their cash. To her, the HoweyCoins website is a enjoyable strategy to get that message out.
“The forex could also be digital, however the ache is actual,” she stated.