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"

U.S. SEC Needs More Time to Consider VanEck Bitcoin ETF Proposal, Invites Comments

The U.S. Securities and Exchange Commission (SEC) announced on Monday (May 20) that it needed more time to consider the VanEck–SolidX Bitcoin ETF proposal. This delay also gives interested parties more time to comment on the proposal and address the SEC's main concerns. 

On 30 January 2019, Cboe BZX Exchange ("BZX") filed with the SEC a proposed rule change to list/trade shares of "SolidX Bitcoin Shares", which would be issued by the VanEck SolidX Bitcoin Trust. This proposed rule change was published in the Federal Register on 20 February 2019. It then had 45 days to approve, disapprove, or ask for a delay.

(Note, however, that BZX had filed its original proposal back in June 2018; the SEC delayed a decision on this proposal several times, and February 27 was the final deadline for the SEC to make a decision. However, due to the U.S. government shutdown that occurred in December 2018 and ended in January 2019, the SEC was partially out of action during this period. By the time that the SEC fully operational again, there was only a few weeks left till the final deadline. So, to give this Bitcoin ETF proposal the best chance of success, on 22 January 2019, BZX withdrew its original proposal, and re-applied (in order to reset the clock) on 30 January 2019.)

Anyway, on 29 March 2019, the SEC released a notice to say that it had selected 21 May 2019 as the date by which it should approve, disapprove, or ask for a further delay to consider the grounds for disapproving the Bitcoin ETF proposal. Why 21 May 2019? Because 90 days is the maximum amount of time it could ask for, and 21 May 2019 is 90 days from 20 February 2019, which was the date that the proposal got published in the Federal Register.  

Well, yesterday (i.e. just one day before the expiry of the 90-day deadline), the SEC decided to delay making a decision, and this time it had to provide "notice of the grounds for disapproval under consideration" (i.e. explain why it thinks that it might deny the proposal).

Here are a few of the SEC's concerns, and it is inviting the ETF's sponsor, i.e. BZX, and other interested parties to provide written comments (in either electronic or paper form):

  • Has BZX "entered into a surveillance-sharing agreement with a regulated market of significant size related to bitcoin?"
  • What is the relationship between the Bitcoin futures market and the Bitcoin spot market?
  • The proposed Bitcoin ETF uses "a non-public, proprietary index to value holdings based on OTC activity", but is this really "an appropriate means to calculate the NAV of an exchange-traded product"?
  • BZX has said in its proposal that it "has entered into a comprehensive surveillance sharing agreement with the Gemini Exchange and is working to establish similar agreements with other bitcoin venues." But is the Gemini digital asset exchange "a regulated market of significant size"?

Any arguments regarding whether the proposal should be approved or disapproved need to be submitted within 21 days of publication in the Federal Register of yesterday's order (Release No. 34-85896; File No. SR-CboeBZX-2019-004), and anyone who wants to "file a rebuttal to any other person’s submission" must do so no later than within 35 days of the date of publication in the Federal Register.

The following tweets were sent out on May 19, i.e. the day before the SEC made this latest announcement, by Crypto Twitter's favorite U.S. attorney, Jake Chervinsky:

According to Chervinsky, "VanEck's new deadline is August 19," and the "SEC can & likely will delay one more time for a final deadline of October 18."

This is how Gabor Gurbacs, Director of Digital Assets Strategy at VanEck/MVIS, expressed his personal thoughts on the SEC's ultra cautious attitude towards Bitcoin ETFs:

The SEC choosing to delay making a decision on the VanEck Bitcoin ETF proposal did not come as a surprise to the crypto markets, which reacted very calmly (Bitcoin's price only went down slightly), and in fact, at press time (11:00 UTC on May 21), according to data from CryptoCompare, Bitcoin is trading at $7,945, up 0.33% in the past 24-hour period:

BTC - 24 Hour CC Chart - 21 May 2019.png