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Following celebrities online generally results in a mixed feed of personal news and paid-for advertisements disguised as thinly veiled personal updates. For some reason, advertisers think that people are gullible enough to buy anti-aging products from child models, and as such, it is no surprise that celebrities endorse everything these days from cellphones to cellophane and even cryptocurrencies.
However, new guidance from the SEC might give both celebrities and social media influencers pause before they make their next post lauding the way using Bitcoin makes them look younger, smell better, and run faster. The SEC is warning that failing to disclose that a celebrity promotion of a cryptocurrency was paid for is a serious criminal violation.
People, generally, are all too quick to accept celebrity and influencer endorsements without really thinking about them. Sometimes, just reading all the hashtags could clearly tell you that your favorite celebrity is just posting something for the #money. Sometimes, celebrities (or their social teams) simply fail to abide by the rules, and rely on the age old adage of it being easier to ask forgiveness than permission.
But as the SEC noted, Initial Coin Offerings (a.k.a. cryptocurrencies) are more often than not considered securities, rather than "resource tokens." This means that when a celebrity promotes some form of cryptocurrency, they are promoting a security offering, and therefore are subject to the laws and regulations governing these offers. The SEC specifically noted that:
Celebrities who endorse an investment often do not have sufficient expertise to ensure that the investment is appropriate and in compliance with federal securities laws.
It specifically warns investors to do their own research, and if they want to invest like their favorite celebrity, they should research the celebrities relationship with the product they're about to invest in.
Cryptocurrencies are sketchy by nature. Even if they didn't used the prefix "crypto-" they'd still be scary. Basically, the idea behind any cryptocurrency is to decentralize issuance and transactions so that the currency cannot be as easily manipulated by individual players, such as governments or banking institutions. While this sounds noble, there is a serious confidence problem caused by internet scammers.
Since one of the constant struggles with these currencies is eroding consumer confidence, it makes sense that the SEC would crack down on celebrity endorsements so as to protect the public from being swindled by scammers manipulating celebrities into helping to deceive the public. Basically, because the currencies are rarely pegged to a "gold standard," if user confidence falls, so too does the currency's value, leaving purchasers with a valueless currency, while the creators keep the real currency exchanged for the crypto.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.