Have you heard of HoweyCoin? It's "one of the largest cryptocurrency platforms ever built" and has the backing of several celebrities. It's also officially registered with the US government and will trade on an SEC-compliant exchange where you can buy and sell them for profit, though you can score a discount if you take advantage of the coin's pre-ICO sale. There's only one problem—HoweyCoin is fake, and none of those claims are true.
The US Securities and Exchange Commission created HoweyCoin and an accompanying website hyping its perks so that investors will know some of the red flags to look for before pouring money into a potentially fraudulent ICO, or initial coin offering.
It's a bit of an unusual move for the decades old agency, which as The Wall Street Journal points out is not exactly known for being all that plugged in to the digital communications scene. But with the rise of fraudulent ICOs, the SEC felt compelled to step in and issue a cleverly constructed warning.
"We’ve recently seen fraudsters pretending to be involved in blockchain technology, initial coin offerings, and crypto-currencies—when really they are simply operating scams designed to take investors’ hard-earned money. We created the bogus HoweyCoins.com site as an educational tool to alert investors to possible fraud involving digital assets like crypto-currencies and coin offerings," the SEC says.
The fake site is filled with red flags, which include claims of high and guaranteed returns, celebrity endorsements, claims of SEC compliance, the option of investing with a credit card, and more warning signs.
In a separate article, WSJ highlights how prevalent ICO scams might be—in reviewing documents for 1,450 digital coin offerings, WSJ found that 271 of them contained red flags, including plagiarized investor documents and bogus executive biographies.
"Investors have poured more than $1 billion into the 271 coin offerings where the Journal identified red flags, according to a review of company statements and online transaction records—nearly one in five of those reviewed," WSJ wrote.
It's an interesting read, and certainly recommended if you have any inkling of investing in an ICO. While some of the ones containing red flags might be legitimate, we wouldn't bet (or invest) on it. Scams do take place, as we saw earlier this year when a little known Ethereum startup stole money from its investors and then trolled them, leaving behind a rewritten homepage with the word "penis" scrawled on it.
What this means for crypoturrency in the long run remains to be seen. Combined with the concern over the power consumption of mining digital coins, it might only be a matter of time before governments intervene (more than they already have).
