SEC uses mock website to warn investors about cryptocurrency

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The page then continues to outline the red-flags the SEC planted on the HoweyCoins' site to demonstrate the false advertising practices that many scam projects employ to rope in investors. The agency which regulates financial contracts in the U.S. launched its own Initial Coin Offering today, complete with an unintelligible white paper, an attractive "investment ladder", and outlandish returns of 2 percent per day.

More than $5 billion had been raised in ICOs in 2017, up from $256 million the year before, according to data from CoinDesk.

In a press release, the SEC said that the site includes "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". They are also a proven way for scammers to get to non-savvy investors who want to tap into the rumored high returns possible with cryptocurrency. In the ongoing process of regulating cryptocurrency, the SEC has been recommending that exchanges use this test as a guide for whether a coin falls under the existing securities regulations or not.

The SEC said the HoweyCoins, name is a reference to the Howey test - the guideline everyone is applying to determine if an ICO is a security (even though they all are - in the US).

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The SEC has done its part to combat ICO fraud. Since it's creation the unit has been actively focusing on ICOs as the largest potential threat to investors.

He added referring to the big discounts fake ICOs often have on offer to lure in victims; "Buy at a 25% discount today because tomorrow it's going to be full value?"

The US-based regulator built the website to highlight the dangers of investing in ICOs. Its decision guides the definition the regulator uses to this day in determining what constitutes a security: "a person invests his money in a common enterprise and is led to expect profits exclusively from the efforts of the promoter or a third party". "It's great that they're educating investors and not just bring (sic) paternalistic, and it's creative too, which I wouldn't have expected", Trevor Koverko, chief executive of Polymath told The Wall Street Journal.

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