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"

Substratum: Project Facing Allegations of Missing ICO Funds

Nuno Teodoro

Several users on Reddit and Twitter have raised some red flags regarding Substratum, an open-source project aimed at creating a foundation for the decentralized web.

The more recent concerns about the project were raised by crypto enthusiast Brian Li via a series of tweets:

 

 

The Substratum team is currently undergoing a second ICO, this time to fund a new crypto exchange called Amplify. However, it seems that there is a discrepancy between the funds received and the ones declared on the whitepaper. On his personal blog, Brian Li published a post providing further evidence for Substratum’s missing ICO funds:

 

“A quick look into the various wallet addresses reveals that Substratum’s funding statistics in its whitepaper are not accurate, and the most obvious example is the difference between the reported and actual BCH contribution amounts. Substratum claims it received 602.1433 BCH during its ICO. However, the given BCH wallet address shows that 1304.26123096 were received in total. In other words, approximately 54% of Substratum’s BCH went unreported and unaccounted for.”

 

A Substratum community moderator offered an explanation for the inconsistency over Reddit, stating that a portion of the funds were received after the end of the ICO. The explanation was contested by Brian Li on his blog post and wasn’t well received by the Reddit community.

Older Concerns

This is isn’t the first time the crypto community has raised major red flags regarding the Substratum project.

Many members of the crypto community had already raised their eyebrows when the Substratum team announced the second ICO, particularly given the fact that Substratum still hasn’t presented a working product after more than a year.

Questioning the need for a second token, some also wondered how much faith the Substratum team has in their previous token, Substratum (SUB), since it is not accepted as a way of funding the new ICO, Amplify (AMPX). Brian Li also observed that changes to the Amplify (AMPX) whitepaper were made mid-ICO:

 

“Two days ago, I noticed the whitepaper link was no longer working on Amplify’s website. Since then, the 404 error has been fixed with a link to a newer version of the whitepaper. The original whitepaper was marked V5.12, while the new whitepaper reads V7. It’s strange for a project to swap out its whitepaper during an ICO process (before or after is okay),”

 

Other possible red flags that crypto enthusiasts flagged up include an allegedly fake Coinbase listing announcement and the criminal record of Justin Tabb, the founder and CEO of Substratum.