The regulatory agency has been praised by many crypto enthusiasts on Twitter for its novel idea of educating cryptocurrency investors.
The securities regulator recently launched a highly useful ICO web page to demonstrate potential investment victims what are the obvious signals of frauds and scams in connection with these investments.
The Securities and Exchange Commission-an 84-year-old agency not known for its digital communications savvy-on Wednesday launched a website that touts a fake initial coin offering, an unregulated way of raising funds that has raised over $12 billion.
The SEC's launch of a fake yet educational ICO website comes at the time of ongoing Consensus 2018 conference wherein a large number of industry players have flocked to the financial capital city of NY. The SEC website shows an intersection between the travel and blockchain industry with several fake promises of outsized investment returns and benefits to the early backers.
The token's backers anticipate at least 1 percent daily returns and a hedge against inflation by combining "the magic of coin trading profits and the excitement and guaranteed returns of the travel industry".
The SEC's fake HoweyCoins.com site warns potential investors about ICOs
"The rapid growth of the "ICO" market, and its widespread promotion as a new investment opportunity, has provided fertile ground for bad actors to take advantage of our Main Street investors", SEC Chairman Jay Clayton is quoted in the HoweyCoins press release. "We embrace new technologies, but we also want investors to see what fraud looks like, so we built this educational site with numerous classic warning signs of fraud", SEC Chairman Jay Clayton (pictured above) said in a statement.
In a white paper (.PDF), downloadable through the website, more indicators of a potential scam are present. That seemed to be one of the few quibbles from Reddit connoisseurs, one of whom argued that the website was a bit corporate, lacking the hipster touch and "the stupid effects ICO webdevs put on". Check. An anxiety-inducing countdown clock? It also provides something even more valuable: advice on how to avoid getting ripped off by fraudulent ICOs.
However, anyone that clicks the "Buy Coins Now" link is instead diverted to an investor education page with advice from the USA agency.
By creating a scam ICO that seems literally too good to be true. Most of these, like pump-and-dumps and guaranteed returns, are already familiar markers in the cryptocurrency. The token's name comes from the Howey test - the Supreme Court's way of determining whether certain transactions qualify as investment contracts. The four-part test, established in 1946, ascertains whether or not a transaction is an investment contract or security. The securities regulator also created a dedicated cyber unit whose goal is to combat fintech as well as cyber-related crimes.
However, the company notes, "the offer isn't real".