SEC Teaches ICO Investors a Lesson
In its latest effort to thwart cryptocurrency scammers, last week the Securities and Exchange Commission launched its own (mock) initial-coin-offering website: HoweyCoins.com. But Howey Coins are not about getting rich quick. Anyone who clicks “Buy Coins Now” on the site will instead be directed to an investor-education website, which identifies red flags that investors should be on the lookout for.
These warning signs include claims of guaranteed returns, celebrity endorsements, and claims of SEC-compliance. As the SEC explains, HoweyCoins.com features several of the enticements that are common to fraudulent coin 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.”
The biggest lesson though is how easy it was to create HoweyCoins.com. “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. Indeed, the SEC built the Howey Coins website in-house in very little time, demonstrating just how easy it is for someone to create a scam.
About Faruqi & Faruqi, LLP
Faruqi & Faruqi focuses on complex civil litigation, including securities, shareholder derivative actions, merger litigation, antitrust, employment law, wage and hour, and consumer class actions. The firm is headquartered in New York, and maintains offices in Delaware, Pennsylvania, California, and Georgia.
Since its founding in 1995, Faruqi & Faruqi has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, consumers and employees.
To contact the author of this blog or the offices of Faruqi & Faruqi, please call us at (877) 476-7797.
About Nicholas Stockton
Nicholas Stockton’s practice is focused on securities litigation. Nicholas is an associate in the firm’s New York office.