The most recent initiative of the regulator is the launch in May 2018 of a special fake ICO website where they show how easy it is to create a page that looks real, but has lots of obvious reg flags if you know what to look at. The SEC wanted to show how to check the reliability of the project, in which the user plans to invest. “The SEC set up a website, HoweyCoins.com, that mimics a bogus coin offering to educate investors about what to look for before they invest in a scam. Anyone who clicks on “Buy Coins Now” will be led instead to investor education tools and tips from the SEC and other financial regulators,” – press release says.
“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.”
The site offers fat warning signs: the promise of guaranteed returns, celebrity endorsements, a white paper with “a complex yet vague explanation of the investment opportunity,” and a countdown clock that shows time running out on the deal (of a lifetime!). All these should explain how to properly check the project and identify fraudulent schemes, for example, how to evaluate white paper, what to look for in it, the site explains that an unclear and ambiguous explanation of investment opportunities, as well as a promise guaranteed profit in the future should become a red flag in the process of selecting a project for investment.
“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. “But fraudulent sites also often have red flags that can be dead giveaways if you know what to look for.”