As governments across the world scramble to get ahead of the ICO boom, there are a great many individuals who have profiteered from scamming. Whether in the form of a fake redirect of a real ICO, or a sham startup site and whitepaper that looks real, fake ICOs have conned the general public out of millions over the last couple of years.
The US SEC has been struggling to find a set of regulations that works for everyone, and have experienced significant backlash from genuine businesses who have been hit by the rules they have imposed. However, their latest initiative is focused around educating the public, by setting up their own scam ICO. People will try to sign up – that much is inevitable – but instead of losing their money, they’ll be taught a valuable lesson they’re not likely to forget.
If you’ve looked at a few ICO pages, HoweyCoins looks as typical as they come. A countdown to a sale, a link to a whitepaper, colourful pictures of the “team” – it’s all there, in capital letters, as seems to be the custom. The page is full of percentages and discounts and potential income; it’s a glittering array of potential money for nothing that is sure to seduce the uneducated and frivolous.
But, to accompany the site, the SEC have also written an educational page about the potential dangers of ICOs. And they’ve listed a number of “red flags” to look out for; a “how to spot a fake ICO” site.
- Claims of high, guaranteed returns
- Celebrity endorsements
- Claims of being SEC-compliant
- Allowing investment with a credit card
The fifth red flag that the SEC lists revolves around spotting a pump and dump scheme – typically this is a danger when an ICO is offering immediate gains for the earliest investors. The plan is clearly to artificially inflate the value immediately after Tier 1 / 2 investment is complete, followed by a mass dumping of tokens.
A Positive Step
This move from the SEC is likely to help their image in the crypto world. Indeed, Charlie Shrem, the founder of Bitcoinfoundation.org took to Twitter to praise the initiative.
I have to applaud the US SEC for launching https://t.co/coxpjPtX2i which is a fake ICO website to educate. Basically, if your project looks like this, you got a problem.
— Charlie Shrem (@CharlieShrem) May 16, 2018
Hopefully, with a bit of sharing, HoweyCoins will reach a wide audience and prevent future scams before they’ve even got off the ground.