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The SEC made a fake cryptocurrency to show you how ICO scams work

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© Provided by Engadget

By Mallory Locklear, Engadget

HoweyCoin, a new digital currency, was launched today through a pre-initial coin offering and the team behind it said it would be "the cryptocurrency standard for the travel industry." The HoweyCoin website offers a number of investment levels as well as various discounts depending on when you invest. However, when you click the "Buy Coins Now!" button, it takes you to an SEC website warning you of the strategies used by ICO scammers.

"We've recently seen fraudsters pretending to be involved in blockchain technology, initial coin offerings and crypto-currencies — when really they are simply operating scams designed to take investors' hard-earned money," says the site. "We created the bogus HoweyCoins.com site as an educational tool to alert investors to possible fraud involving digital assets like crypto-currencies and coin offerings." The agency even put together a white paper about its fake coin.

The site then goes on to describe a handful of red flags that signal a scam including claims of high, guaranteed returns, celebrity endorsements, claims of SEC compliance, ability to invest with a credit card and pump and dump schemes. Each of those elements were included in the fake HoweyCoin site and the SEC uses them to explain why they should alert potential investors. In regards to pumping and dumping, the SEC site says, "In a pump and dump scheme, fraudsters typically spread false or misleading information to create a buying frenzy that will 'pump' up the price of a stock and then 'dump' shares of the stock by selling their own shares at the inflated price. Once the fraudsters dump their shares and stop hyping the stock, the stock price typically falls and investors lose money."

The SEC has been cracking down on cryptocurrencies and ICOs lately. It formed a Cyber Unit last year and has brought charges against a number of individuals hosting allegedly fraudulent ICOs. The agency also said it would be looking closely at companies that suddenly pivot to blockchain or cryptocurrencies.

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Technology - U.S. Daily News: The SEC made a fake cryptocurrency to show you how ICO scams work
The SEC made a fake cryptocurrency to show you how ICO scams work
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Technology - U.S. Daily News
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