SEC Educates Investors About ICO Scams

SEC Educates Investors About ICO Scams

The Securities and Exchange Commission (SEC) educated the investors about ICO scams in an ingenious way.

A new digital currency launched was today with the name of HoweyCoin. The cryptocurrency is going through a pre-ICO stage and its team said that the cryptocurrency would be the “standard for the travel industry”. The website shows you a number of investment levels and various discounts based on the time when you choose to invest.

Upon clicking the “Buy Coins Now!” button, you are redirected to an SEC website which tells you how close you were to being scammed. This is SEC’s way of letting you know how dangerous it could be to invest in an ICO and also how easy it is for scammers to fool you into giving them your money.

The SEC website then explains the whole ordeal by saying:

“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. We created the bogus site as an educational tool to alert investors to possible fraud involving digital assets like crypto-currencies and coin offerings.”

The website for the cryptocurrency looks stunningly similar to most of the ICO websites in the industry right now. One can easily be fooled into losing money on such websites. To add credibility to the HoweyCoin website, the SEC team even uploaded a white paper on the website.

SEC educated users about various red flags which can help users to protect themselves from such scams.

The first red flag they pointed out was the website claiming high, guaranteed returns:

Every investment carries some degree of risk, which is reflected in the rate of return you can expect to receive. High returns entail high risks, possibly including a total loss on the investments. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are “guaranteed” or “can’t miss.”

Next up they warned users about celebrity endorsements:

Celebrities, from movie stars to professional athletes, can be found on TV, radio, and social media endorsing a wide variety of products and services – sometimes including crypto-currencies and coin offerings. A celebrity endorsement does not mean that an investment is legitimate or that it is appropriate for all investors. It is never a good idea to make an investment decision just because someone famous says a product or service is a good investment.

Then they warned users about false SEC-compliance claims:

The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not. Many platforms refer to themselves as “exchanges,” which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange. Although some of these platforms claim to use strict standards to pick only high-quality digital assets to trade, the SEC does not review these standards or the digital assets that the platforms select.

Another notable red flag they educated users about was investing using credit cards:

Investors should understand that most licensed and registered investment firms do not allow their customers to use credit cards to buy investments or to fund an investment account. We urge investors to work only with a licensed or registered investment professional or firm and not attempt to use a credit card to fund investments.

Lastly, they warned users about pump and dump:

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.

Please follow and like us:

Leave a Response

Syed Ali Mudassar
It was when he was pursuing his graduation in Computer Science that he found his flair for writing about new and existing technologies. He likes researching about technologies and how they could help people. Currently, he works as the Content Manager at CoinFrenzy, a leading blockchain news, and media publication website.