SEC Launches its Own Fake ICO as Warning to Investors

Avi Rosten
  • The SEC's very own coin named "HoweyCoin" comes complete with a website featuring a team, testimonials and a whitepaper
  • The regulator hopes the fake coin will educate would-be investors about fraudulent ICOs

The SEC (The US Securities and Exchange commission) has today announced an intriguing new initiative designed to educate investors about fraudulent ICOs.

The regulator has launched its own ICO - HoweyCoin - complete with a website showcasing the ICO pre-sale, team, whitepaper - and even tweets touting the potential of the new coin.

The coin aims to revolutionize the travel business, explaining that most travel businesses need “processing, centralized currency and…nickel and dime fees that add up to literally billions.”

Howeycoin differs, however, because:

“HoweyCoins utilize the latest crypto-technology to allow travelers to purchase all segments without these limitations, allowing HoweyCoin users to buy, sell, and trade in a frictionless environment – where they use HoweyCoins to purchase travel OR as a government-backed, freely tradable investment – or both!”

HoweyCoin

The twist is that HoweyCoin is fake - and users who try and invest in the sale are redirected to the SEC’s educational site which reads:

“If You Responded To An Investment Offer Like This, You Could Have Been Scammed – HoweyCoins Are Completely Fake!”

SEC

Presumably named after the legal “Howey test” that the SEC uses to determine whether a financial instrument is a security, the ICO claims that investors can expect to receive 1-2% returns and offers token sale discounts to early investors alongside pictures of exotic locations.

In a press release, the SEC explained that the whitepaper included on the site was designed to mimic other whitepapers, and features:

“a complex yet vague explanation of the investment opportunity, promises of guaranteed returns, and a countdown clock that shows time is quickly running out on the deal of a lifetime."

SEC

While many within the crypto world regularly express their discontent with regulatory bodies and see them as stifling the industry, this latest move from the SEC will no doubt serve as an important warning to would-be investors, and might at least raise a smile from the regulator’s detractors.

Featured Image Credit: "Securities and Exchange Commission" by "Scott S" via Flickr; licensed under "CC BY 2.0"

New Cryptocurrency-based ETF Filed with US SEC

The US Securities and Exchange Commission (SEC) has received another application for a cryptocurrency-based exchange-traded-fund (ETF). Submitted on May 9, 2019, the latest crypto ETF application was prepared by Crescent Crypto Index Services LLC, a subsidiary of Crescent Crypto Asset Management LLC.

Crescent Crypto Index Fund (“XBET”)

According to Crescent Crypto’s prospectus, the ETF will “track the performance of a market capitalization weighted portfolio of bitcoin (BTC) and ether (ETH).” Referred to as the USCF Crescent Crypto Index Fund (“XBET”), the ETF is supported by the US Commodity Funds LLC (USCF), which will reportedly invest XBET’s assets in both BTC and ETH (held in the investment portfolio).

According to the ETF application: “XBET is an exchange traded fund. This means that most investors who decide to buy or sell shares of XBET place their trade orders through their brokers and may incur customary brokerage commissions and charges.”

As noted in Crescent Crypto’s prospectus, shares of XBET are “expected to trade” on the New York Stock Exchange (NYSE) Arca under ticker symbol “XBET.” In a manner that is similar to how traditional ETFs are traded, the crypto-based ETF, if approved, will “be bought and sold throughout the trading day at bid and ask prices like other publicly traded securities.”

Founded in 2005 and headquartered in Oakland, California, the United States Commodity Funds LLC is “an issuer of exchange traded commodity products (ETPs).” Notably, the first fund it launched (in 2006) was United States Oil Fund, LP, which is reportedly “the first commodity ETF based on crude oil launched in the United States.”

Bitwise Asset Management, VanEck/SolidX ETFs Applications To Be Reviewed This Month

USCF is currently regulated by the US Commodity Futures Trading Commission (CFTC) and the National Futures Association - under the Commodity Exchange Act (CEA).

Currently, there are several ETFs that have been filed with the SEC, including one submitted by Bitwise Asset Management with NYSE Arca and one by VanEck/SolidX, which was filed through a partnership with Chicago Board of Options Exchange (Cboe).

In March 2019, the SEC postponed its decision on whether to approve ETF applications filed by both VanEck/SolidX and Bitwise Asset Management. The federal securities regulator is now expected to review both ETFs this month.

Cryptocurrency Volatility May Be Affected By ETF Decisions

To date, the SEC has not approved any cryptocurrency ETF applications, however several analysts have argued that one will be approved in the foreseeable future.

According to a recent report from SFOX, a “prime dealer of cryptoassets for sophisticated traders and institutional investors,” the volatility of cryptocurrencies may be affected by “Bitcoin exchange-traded-fund (ETF) decisions,” among other factors such as the expiration of crypto futures contracts, and the discussions during “major” crypto and blockchain conferences such as Consensus which is taking place mid-May