Social media ‘influencers’ who used their status to encourage followers to invest in projects, but did not disclose that they were paid to do so, could be next in the crosshairs of the U.S. Securities and Exchange Commission (SEC). With two cases of illegal celebrity endorsement already under its belt, the SEC seems to be focusing on the famous names within the cryptocurrency sphere, according a tweet posted by the SEC Enforcement account:
2/2 … Social media influencers are often paid promoters, not investment professionals, and the securities they’re touting, regardless of whether they are issued using traditional certificates or on the blockchain, could be frauds.” https://t.co/WzgvPU7Esg
— SEC Enforcement (@SEC_Enforcement) November 30, 2018
(Don’t) Show me the Money!
The cases of boxer Floyd Mayweather and music producer DJ Khaled marked a watershed moment in the SEC’s activities within the cryptocurrency space. For that reason, it is a natural move for them to widen their scope to take on other individuals that acted in a similar, if not identical, manner.
The SEC has stated in their rulings that celebrities who receive payment for openly promoting ICOs and don’t disclose it are very likely to have fallen foul of U.S. securities regulations, if that ICO is later considered a security. It is reasonable to assume then that the same approach will be taken with well known social media promoters, who may have thought that they didn’t need to disclose payments they received or alternatively chose not to, tricking investors into buying coins on the back of their ‘recommendation’.
Party Like it’s 2017
Mayweather and Khaled’s fines ended up totaling over three times what they were paid by the ICOs. For international superstars with multi-million dollar fortunes these fines may be chump change. However, for inexperienced crypto traders who by and large got lucky, and who have had to weather a crippling bear market, a six-figure payout might represent their entire wealth, if not exceeding it.
As the bad boys of BitConnect have found out, sometimes fines don’t cover it and a court date beckons. It goes without saying that there will now be many a famous face (or avatar) frantically going through their records searching for ICO payments, and it’s plausible to think that we might be in for a flurry of admissions that will go some way to illustrating just how the ICO promotion racket operated during its 2017 heyday. These influencers have long promoted the benefits of the blockchain’s ability to act as an immutable ledger, but some of them must be wishing there wasn’t a delete button somewhere right now.