“If you’ve ever been tempted to buy into a hot investment opportunity linked with luxury travel, the Securities and Exchange Commission has a deal for you,” the agency announced in a press release today. But the referenced “HowleyCoin” offering is a sham. The Securities and Exchange Commission (SEC) designed HowleyCoin.com as a creative means of educating investors about the risks posed by fraudulent initial coin offerings (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,” said SEC Chairman Jay Clayton. “We embrace new technologies, but we also want investors to see what fraud looks like, so we built this educational site with many of the classic warning signs of fraud. Distributed ledger technology can add efficiency to the capital raising process, but promoters and issuers need to make sure they follow the securities laws. I encourage investors to do their diligence and ask questions.”
Investors seeking to buy “HoweyCoin” are instead redirected to educational tools published by the SEC and other regulators such as the Commodity Futures Trading Commission and the Consumer Financial Protection Bureau. The website notes several “red flags” for fraudulent ICOs, including guaranteed returns, celebrity endorsements, and the ability to purchase investments using credit cards. The SEC made clear that the website was made “in very little time, which demonstrates just how easy it is for someone to create a scam opportunity.”
“Fraudsters can quickly build an attractive website and load it up with convoluted jargon to lure investors into phony deals,” said Owen Donley, Chief Counsel of the SEC’s Office of Investor Education and Advocacy. “But fraudulent sites also often have red flags that can be dead giveaways if you know what to look for.”
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