Gensler’s message will likely have little effect, since the spammers are using celebrities to give a voice to their products.
Kim Kardashian was fined $1.26 million by the SEC for failing to disclose that she received $250,000 in exchange for her endorsement of a token called EthereumMax. The celeb has previously been cautioned about endorsing the product, yet continued to do so.
With celebrities endorsing new technologies and not disclosing their investments, the SEC looked to “send a message” by pressuring Kardashian. This high profile target will serve as a warning for other celebrities who endorse the crypto industry.
As the markets are dropping precipitously, we continue to uncover scandals from the COVID-19 crisis that were swept under the rug by FOMO during a market rally. Three Arrows Capital was found to be rehypothecating borrowed funds and Alex Mashinsky, founder of now bankrupt neo-bank Celsius Network was found after COVID-19 to siphon funds of COVID-19 crisis victim’s funds.
Celebrities endorse a product but often do not promote the product beyond that. Non-celebrity figures in the Bitcoin industry like Mashinsky and Kyle Davies had more visibility than celebrity endorsers, by promising much better returns.
Celebrities have caused financial markets to be influenced like never before. Kardashian posted about EthereumMax on her Instagram account with 220 million followers, the most popular social media post in history to date. Gen Zers’ 2nd most popular financial advice comes from social media.
Investors in the company complained the tokens were becoming less valuable due to slow progress on their project. In particular, investors brought up that after an instance where one of the social influencers promoted their token, the token’s value had been dropping significantly. Developers working on EthereumMax have attempted to continue going about business as usual following this drop, but investors are more hesitant to invest.
Kardashian’s fans have argued that she is being scapegoated. The post that may have violated the FTC disclosures noted it was “#ad” and she included ‘not financial advice’. These are exactly the same qualifiers that Mayweather has on his social media posts endorsing EthereumMax.
The SEC regulates public offerings of securities, and all crypto coins are essentially securities. Gensler has convincingly argued that crypto falls under the purview of the SEC, who is responsible for ensuring full fair and truthful disclosure in securities.
Lisa Braganca, the former SEC enforcement branch chief, was quoted in CoinDesk TV saying that ” the SEC always looking for a way to get the message out to the public.” She believes that when someone with Kim Kardashian’s following does something like this, it is self-promotion.
Though Kardashian’s settlement may have negative effects on the industry, it cannot stop the creation of forked open-source projects. It is too easy to pay for some engagement or marketing and sell dreams of ‘disruption’ to retail investors. Though Kardashian did not admit wrongdoing, she is participating in the SEC’s investigation into Ethereummax.
As Kardashian’s settlement came weeks after Twitter announced she was moving into private equity, some financial pundits believe that this was a smart move given her enormous social influence.
At Skky, we are looking to invest in a variety of industries, with paying attention to the fast-growing industries like media, hospitality and digital commerce. Kardashian was once interested in cryptocurrencies but she likely won’t promote them now that she has been prohibited by the SEC because of her last investment. She already tried her hand at this before but it clearly turned out to be a scam.
