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"

Circle Pay to Shutter Doors, in Wake of Poloniex Troubles and Circle Layoffs

Circle, a fintech startup backed by the likes of Goldman Sachs, Bitmain, and Baidu, announced that it would discontinue (or “sunset”) its mobile-based payments app, Circle Pay. Pay had been a competitor for apps like Venmo, Cash App, and Revolut.

The process should be complete by the end of July, when all users’ funds will be returned to associated bank accounts. No explicit reason was given for the closure.

Circle got off the ground in 2013, and last year bought the Poloniex cryptoasset exchange, which many saw as a sign of increasing institutional interest at the time. More recently, Circle launched a USD-pegged stablecoin, USD Coin (USDC), which is legally audited to prove USD backing.

More recently, CryptoGlobe reported that Circle cut their staff by 10% (30 people), with CEO Jeremy Allaire pointing to “an increasingly restrictive regulatory climate” in the U.S.; a climate which apparently forced circle to remove nine cryptoassets from trading on their exchange. Indeed, Bittrex and Binance have both this month followed in Circle’s footsteps, as it were, with massive curtailments of their U.S. trading offerings.

Poloniex Troubles

Poloniex, a once central cryptoasset exchange in the industry, has hit a rough patch recently, when its leverage trading system proved unable to function correctly and pay the winning counterparties of a trade.

This occured when the price of an obscure cryptoasset, CLAM, collapsed, and with it the long positions of some Poloniex customers. The margin short trades could not be repaid because the principals were also held in CLAMs, rather than bitcoin.

Poloniex initially made the decision to distribute this loss over all of its margin traders, which make up only 0.4% of Poloniex customers according to the exchange. Poloniex were criticized both for “socializing” losses in this way, and for allowing such highly leveraged trading on low liquidity assets. They have since decided to make whole customers who were affected by the generalized losses.

Update 10:30 UTC 18th June 2019: This article was updated to include Poloniex's decision to make customers who were affected by the generalized losses whole.