SEC Launches Mock Website to Highlight ICO Risks

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SEC Launches Mock Website to Highlight ICO Risks

The Securities and Exchange Commission (SEC) is out with a new idea to ‎highlight the risks of the booming ICOs market, which has grown rapidly with ‎estimates topping $4 billion in token sales in 2017 alone. ‎

The SEC’s Office of Investor Education and Advocacy (OIEA) has created a bogus ‎initial coin offering (ICO) website that advertises a ‘too good to be’ true ‎investment opportunity. The regulator said it wants to explain that as with ‎many other hyped markets, scammers are never far behind in trying ‎to take advantage of cryptocurrency-based schemes.‎

The fictitious‏ ‏site, HoweyCoins.com, shows many sales tactics in which an ‎investor is attracted by fraudulent ICO advertisements. Thus it educates potential investors about what to look for before they invest in a ‎scam. The website offers education tools from the SEC and other ‎regulators using creative ways, such as showing tips ‎when the user clicks on “Buy ‎Coins Now” buttons.‎

The SEC added that most ICO providers fail to disclose the value of their projects, making it hard ‎for investors to distinguish between legitimate and fraudulent intentions. As such, the launch of its ‎mock site aims to detail the risks that ICOs present to investors, claiming they ‎provide the ideal environment for scammers.‎

The SEC recently issued multiple trading suspensions and halted several ‎token sales. Earlier in January, the agency halted a fast-moving initial coin ‎offering (ICO) that was seeking to raise up to $1 billion from thousands of ‎investors ‎to develop “‎the world’s first decentralized cryptocurrency bank.”‎

SEC Chairman Jay Clayton commented: “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. 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.”‎

Owen Donley, Chief Counsel of the SEC’s OIEA office, added: “Fraudsters can quickly build an attractive website and load it up with ‎convoluted jargon to lure investors into phony deals. But fraudulent sites also often have ‎red flags that can be dead giveaways if you know what to look for.”‎

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