What has happened?

The US Securities and Exchange Commission (SEC) is pitching a fake initial coin offering (ICO) website to help investors identify too-good-to be true ventures.

What does this mean?

There's a hot new ICO website in town — one promising the chance of earning an enormous amount of money from beaches in the sun with azure blue waters, coconut trees and cute seashells.

The sleek website comes complete with a white paper, Twitter testimonials and a list of team members.

It also states that the token’s backers anticipate at least 1% 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”.

This enticing website comes courtesy of the SEC, which launched a mock ICO called HoweyCoin that "touts an all too good to be true investment opportunity".

However, the offer is not for real and the website features several of the enticements that are common to fraudulent offerings, including a white paper "with 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.

Users who click on "Buy Coins Now!" are redirected to an SEC's page pointing out the signs of fraudulent token sales and showing some of the red flags of which investors should beware.

Some of these include claims for high, guaranteed returns, claims of SEC-compliance, celebrity endorsements and asking investors to use their credit cards.

A warning also awaits users:

“If you responded to an investment offer like this you could have been scammed — HoweyCoins are completely fake!”.

Owen Donley, Chief Counsel of the SEC’s Office of Investor Education and Advocacy, who doubles as “Josh Hinze” on the website, said:

“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.”

In its accompanying press release, the SEC explains that the website’s name, HoweyCoins, is "a bit of an Easter egg" — a tongue-in-cheek reference to the Howey test, which is used to determine whether a transaction is an investment contract.

The SEC said it built the HoweyCoins website in-house in very little time, which "demonstrates just how easy it is for someone to create a scam opportunity".

Earlier this week, two members of the SEC enforcement division told members of Congress that "emerging cyber-related threats" are now among among the “greatest risks” to investors.

In a testimony, Co-Directors Stephanie Avakian and Steven Peikin told a House committee about the division's actions to date to "address ICOs and cryptocurrencies", as well as ongoing warnings to the public about the risks associate with ICOs and cryptocurrencies.

Next steps

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