With energy prices rising, switch to a cheaper plan
Compare Prices Now

US regulator launches Howey Coin to teach us about ICO scams

Posted: 17 May 2018 4:40 pm

In a play on their Howey Test for testing whether an investment is a security, the Securities and Exchange Commission has launched a dummy coin to educate traders.

The esoteric nature of cryptocurrencies and the public's massive lack of understanding make it ripe ground for shysters and charlatans. Earlier this year, we saw the fake ICO for Prodeum, which disappeared, wiping its website and leaving just the word "penis" behind. And Ernst and Young have said 10% of all ICO funds end up being stolen.

It's little wonder regulators are looking to play the role of sheriff in the cryptocurrency wild west.

But rather than rolling in with guns blazing, the United States' Securities and Exchange Commission has taken a different approach. They have created a fake website complete with a fancy looking white paper and even some fake Twitter accounts that look like famous people are endorsing the fake coin.

All of those tactics are part of any ICO but the SEC's efforts prove how easy it is to create a completely fake, but real-looking, ICO that can potentially fleece people out of millions of dollars.

It doesn't take long to see through the scam – I'm pretty sure there isn't a boxer in the world going by the generic handle @boxingchamp1934 since most will want to make sure there's a superlative attached to their name. But the discount scheme, the ability to use a credit card to buy in and the nice design make it all look very serious.

However, when you hit one of the "Buy coins" buttons liberally distributed on the site, you're directed to an advice page explaining that it's a scam and providing some advice on how to identify fakes in the future.

This is the real value of the Howey Coins site. It provides some solid advice on how to spot the red flags that can help you question whether an ICO is legitimate or a fake.

Now that cryptocurrencies are here to stay, the SEC and other regulators need to realign their thinking. Rather than simply tilting at windmills, efforts like this show regulators are preparing to help people through the world of cryptocurrencies so they can make smarter choices when it comes to ICOs and where they put their money.

Disclosure: At the time of writing, the author holds BTC, EOS, ETH, XLM, ETN, LTC, ADA and XRP.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Latest cryptocurrency news

Picture: Securities and Exchange Commission

Get into cryptocurrency

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site