SEC has created a fake cryptocurrency site to warn investors of ICO scams
Have you heard of HoweyCoin? It is "one of the largest cryptocurrency platforms ever built" and has the support of several celebrities. It is also officially registered with the US government and will trade on a SEC-compliant exchange where you can buy and sell for profit, but you can score a discount if you enjoy the pre-ICO sale of the coin. There is only one problem: HoweyCoin is wrong, and none of these claims is true.
The US Securities and Exchange Commission has created HoweyCoin and a website that accompanies its benefits so that investors know some of the red flags to look for before paying money into a potentially fraudulent ICO or an initial offer of coins.
This is an unusual move for the agency in recent decades, which, as the Wall Street Journal points out, is not exactly known for being all that is plugged into the digital communications scene. But with the rise of fraudulent ICOs, the SEC felt compelled to step in and issue an intelligently constructed warning.
"We've recently seen fraudsters claim to be involved in blockchain technology, initial coin offerings and crypto-currencies, while they're just scams to take the hard-earned money from investors. an educational tool to alert investors of potential fraud involving digital assets such as cryptocurrencies and coin offers, "says the SEC.
The fake site is filled with red flags, which include high and guaranteed returns, celebrity endorsements, SEC compliance claims, the ability to invest with a credit card, and other warning signs.
In a separate article, WSJ highlights how widespread ICO scams were - by reviewing documents for 1,450 digital coin offers, WSJ found that 271 of them contained red flags, including investors plagiarized and fake biographies.
"Investors have paid more than $ 1 billion into 271 coin offerings where the Journal has identified red flags, according to a review of the company's statements and online transactions - nearly one in five."
This is an interesting reading, and definitely recommended if you have an idea to invest in an ICO. While some of those with red flags might be legitimate, we would not bet (or invest) on them. The scams take place, as we saw earlier this year when a little-known Ethereum start-up stole money from its investors and then tracked them down, leaving a rewritten homepage with the word "penis" scribbled.
What this means for long-term cryptic currency remains to be seen. Combined with the concern over the energy consumption of digital mining parts, it might be only a matter of time before governments intervene (more than they already have).