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"

Israelis Unable to Pay Tax on Crypto-Trading Profits as Banks Freeze Up

Israeli tax authorities are missing out on potentially millions of dollars worth of tax income from cryptocurrency investors as local banks will not accept deposits from crypto earnings.

Israel's daily newspaper website Haaretz reported on Tuesday that the country's crypto investors were unable to deposit the returns on their bitcoin and other investments into bank accounts due to money laundering and terrorist financing concerns.

While bitcoin trading is subject to a 25% capital gains tax for individuals and a 47% rate for corporates, banks fear accepting deposits from crypto-trading activities due to concerns that they might be accused of abetting in criminal activity should the dealings of individual crypto traders be discovered illegitimate.

Supreme Court Intervention Fails

On February 25, 2018 the Supreme Court issued a temporary injunction prohibiting a bank from blocking activities in an account held by a company engaging in bitcoin trade. 

The bank countered, however, alleging that such activities might expose it to unlawful acts that "might harm its reputation and public trust in the bank".

The issue has yet to be resolved and remains under review by the Supreme Court.

Deposits Still Refused

Haaretz quoted the example of Ron Gross, who has reported all the bitcoin investments he's made since 2011 to the Israel Tax Authority, but his bank - Hapoalim - refused to let him deposit his profits in his account. 

This meant his profits were stuck in his Swiss bank where he deposits the dollars he converts from bitcoin and have no way of reaching Israel.

Without shekels to pay his bill the Tax Authority put a lien on his Hapoalim account and his home. He told Haaretz:

The Tax Authority is aware of the problem, but say the ball isn't in its court. I've tried working with almost all the banks, but the minute they hear the word 'bitcoin' they freeze up.

The Problem Deepens

Indeed, reports Haaretz, the Tax Authority estimates it is missing some 300 million shekels ($86 million) in unpaid tax on crypto earnings.

This is a classic example of a government shooting itself in the foot, as it was the Tax Authority, together with the Bank of Israel and market and financial crime regulators that issued a statement in February 2014 warning against dealing with cryptocurrencies.

The statement argued cryptoassets are not legal tender and there is "no requirement to accept them as payment", and specifically warned financial institutions that such activity came with a "high risk coefficient in terms of money laundering and terror financing".