Spotting ICO Fraud Using HoweyCoins

HoweyCoins are a token that the SEC in the United States is using to raise awareness of ICO scams. They have published the website www.howeycoins.com which is currently in pre-ICO phase. Then when you click on their "Buy Coins Now!" button, you're taken to an SEC website. And on the website they have some tips related back to HoweyCoins on how to identify a scam. The name is a reference to the Howey Test used to determine if something is a security.

Howeycoins brought to you by the SEC
While many in the cryptocurrency industry claim that the SEC doesn't understand the industry, they've clearly seen enough websites and read enough whitepapers to get the tone right. The only thing missing is the dynamic-network background.

Admittedly there were a few give-aways that you're being trolled by a government agency. Things like the Internet being recognised as a proper noun and capitalised. Or when bullet points have their semicolons in the correct locations:

  • More travel service providers and travelers adopt HoweyCoins as a medium of exchange; while
  • The finite amount of HoweyCoins limits supply in the face of ever increasing demand by travel service
    providers and travelers; and
    โ€ฆ
    Just look at this well placed em-dash: โ€ฆwill flow to youโ€”the consumer.

Unfortunately the miss on two counts. They failed to understand that many ICO investors don't believe in the long-term success of the project, intending to sell as soon as is profitable. And they fail to list a number of red flags to look out for. So here are some extra tips to keep in mind.

Short Term

If you're going to sell as soon as your token is worth 10% more than you paid for it, you won't have a lot to care about. But you should at least check that:

  1. The people responsible for the ICO are actual people, not fake identities. And if possible, that their reputation is worth more to them than their likely to make from the ICO; or better still, that they a residents in a country that is likely to jail them for commiting outright fraud like never producing the tokens.

  2. If you're tokens can never be exchanged all the way back to cash, they're not worth anything. Look into exchange support or other means of trading.

Long Term

  1. No matter how good an idea is, it is worth nothing if there is nobody to make it happen. Have a good look at the team and their track record from independent sources.
  2. If it uses blockchain technology beyond creating the tokens, but existing technology like a secure database, or electronic cash transfer like Paypal can do a better job, walk away. Blockchain is powerful technology that enables functionality that has not previously existed. But that functionality sits within a very narrow niche and trying to use it where it is not required will cause a business to waste income.
  3. Is the value of your token designed to go to the moon, because the very same token enables incredibly cheap access to a popular service or product? If so, walk away. You can't have your cake and eat it too. The service will not be cheap if the token for the service is expensive due to speculation. This bumps into the next point.
  4. Where are they spending your money? Have a good look at where the proceeds go. If the majority of the proceeds don't go towards creating and delivering a valuable product, you're buying a piece of a pyramid. Never trust any company that spends more on marketing than it does on delivering value, except maybe fashion items which only have value due to marketing. A quick calculation will often show that raising $100 million to create $10 million worth of product to sell to a market share that is worth less than $1 million is going to end in tears.

If you know of an ICO and it passes the long-term risks above, please make a post on this forum sharing your research, and link to it in the comments below.

@timmarsh are you getting yourself some howeycoins?

Saw this after my post: https://blockchainforums.info/topic/480/howeycoins-hwc

Damn you, @timmarsh ๐Ÿ˜‚

Hey @AfriDylan

I struggled to find the brilliance which you spoke about in your post... I hadn't even done any digging, but the proposed use case didn't make an iota of sense to me. Haha!!! I guess this is where DYOR comes in.

It's really interesting -- I have been in the blockchain space for a while now and lost some good money too, so before I believe anything, I do tons and tons of research.

@timmarsh Nice work; @AfriDylan you obviously need to make restitution for misleading us. I accept cryptocurrency.

@coin_raven said in Spotting ICO Fraud Using HoweyCoins:

Hey @AfriDylan

I struggled to find the brilliance which you spoke about in your post... I hadn't even done any digging, but the proposed use case didn't make an iota of sense to me. Haha!!! I guess this is where DYOR comes in.

It's really interesting -- I have been in the blockchain space for a while now and lost some good money too, so before I believe anything, I do tons and tons of research.

@timmarsh Nice work; @AfriDylan you obviously need to make restitution for misleading us. I accept cryptocurrency.

๐Ÿ˜‚ Glad to see you caught on, @Coin_Raven

I don't feel too guilty about misleading you, considering the page redirects anyone curious enough to try buying to an SEC informational site: https://www.investor.gov/howeycoins.. It's all for the better. Nothing like some good education. ๐Ÿ™‚

I will gladly make restitution. Just provide me with your ETH wallet address and keys, and I'll send you a few hundred HoweyCoin. GUARANTEED RETURNS!