SEC Debuts HoweyCoins.com Website to Demonstrate Ease of Defrauding Investors and to Educate on Scam Warning Signs
Investors often are introduced to tempting, but fraudulent, investment offers through solicitations on the World Wide Web. The Securities and Exchange Commission (SEC) recently introduced a website at www.HoweyCoins.com that does just that.
Now, even the institution that is charged with protecting United States investors has gotten into the act of scamming them. But it is all for a good cause. That cause is investor education.
The HoweyCoins.com website mimics a bogus initial coin offering (ICO) which touts a coin for travel investment opportunity with the goal of educating investors about what to look for before they invest in a scam.
The website was built relatively quickly by SEC personnel.
“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 have red flags that can be dead giveaways if you know what to look for.”1
The HoweyCoin.com website purposely has red flags, including a difficult to understand explanation of the investment opportunity, promises of a guaranteed return and a call to action that makes the investor believe that if they don’t act quickly this tremendous deal will slip through their hands.
The first thing you see on the HoweyCoin.com website is a countdown clock. It touts a 15 percent discount during the “Pre-ICO” sale and shows a clock ticking down the minutes until the sale is over. There is probably no better way to create urgency to act than a ticking clock.
Unfortunately for investors, that clock can be likened to a ticking time bomb, because acting in haste, without doing research on the investment, is how many of these scams are able to cause such financial devastation to investors. Near the “Buy Coins Now” selection is an even better offer of 25 percent off if coins are purchased by a certain date.
The site also contains a white paper which is loaded with that convoluted, not easy-to-understand jargon. By using the term ‘white paper’ the investment appears more legitimate as that term is often used in academic and corporate arenas.
Another clear red flag warning in the white paper is that they don’t disclose the names of any of the “large, well-known travel service providers — international hotel and resort brands, airlines, travel industry-related comparison websites, car rental companies and on-demand online care services, large chain restaurants located in travel hotspots, etc.” who will accept these coins for travel because these negotiations and agreements are all currently subject to nondisclosure agreements.2
If you had stumbled upon the www.HoweyCoins website and finally decide to invest, the site directs you to a “Buy Coins Now” box. If you click on this, the first thing you will see is a statement that reads, “If you responded to an investment offer like this, you could have been scammed — HoweyCoins are completely fake!”3
The site then points out some of the red flag warnings in the HoweyCoins offering and tells you why these signs can be warnings of a scam. These include claims of high guaranteed returns, celebrity endorsements, claims of being SEC compliant, ability to pay for the investment with a credit card, and pump and dump scams. The site has links to a number of other resources to learn more about what to look for with these investment scams.
Investor education on the ways fraudulent companies perpetrate these scams is a powerful way to stop vulnerable people, especially seniors, from losing their life savings. Taking the time you need to thoroughly research an investment, and the people selling you that investment, is the best way to prevent investment fraud.
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1 The SEC Has an Opportunity You Won’t Want to Miss. Act Now!, U.S. Securities and Exchange Commission Press Release, May 16, 2018
2 Howey Coins White Paper, May 2018
3 ICO Howey Coins, U.S. Securities and Exchange Commission