Crypto-Endorsements Gone Sour | A Celebrity Special

September 13, 2018

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Over the past one and a half years, the ICO crowdfunding trend has grown tremendously. There is no doubt that an overwhelming number of blockchain-based projects are significantly sprouting every day.

With competition becoming viciously cut-throat, some ICOs are procuring celebrity aid to help them stay ahead. Simultaneously, crypto-enthusiasm is growing among celebrities, and it’s no surprise that many celebrity crypto-endorsements are making headlines.

Celebrity interest in the cryptocurrency sector is not new. In fact, quite a number of celebrities have come out to show support for their favorite cryptos in different ways. At the beginning of the year, singer Katy Perry flaunted her ‘crypto-manicure’ on Instagram as a dedication towards cryptocurrencies. Rapper 50 cent accepted bitcoin payments for his 2014 album Animal Ambition while Nas rewarded fans with Bitcoin on his Nas trivia contest on The Rap Test website.

Image Courtesy of Katy Perry Instagram

So, Why Mix Celebrities and Cryptocurrencies?

The move towards crypto-endorsements is one that was both new and unexpected for the industry. Nevertheless, ICO companies were striking symbiotic relationships with these celebrities for one primary reason- celebrities are great influencer marketers. They have an overwhelming amount of influence over a large number of audiences both on social media and offline. Moreover, they can spread the word about an ICO fundraising event to audiences effortlessly.

Furthermore, people tend to idolize celebrities. Therefore, if a celebrity is promoting a product, the chances are that their fans will buy the product. While not all industry players agree with the celebrity endorsement theory, the exposure is apparently working for some ICOs. However, not all celebrity crypto-endorsements are working out as some hyped ICOs are experiencing significant failures. Here’s a look at some of these failures along with the celebrities that endorsed them.

Failed Celebrity Crypto-Endorsements

Steven Seagal

Image Courtesy of Twitter

First on the list is the famous action star, Steven Seagal. He made headlines this year after endorsing an ICO dubbed Bitcoiin2Gen, popularly known as Bitcoiin. He served as the ICOs brand ambassador and even went to the extent of hyping up the coin on his Twitter account several times. At one point he even suggested that the coin would be available on some of the world’s largest crypto-exchanges.

Fortunately, the state of New Jersey caught wind of the dubious project and issued a cease and desist order to the founders of Bitcoiin. It’s alleged that Bitcoiin was not registered as a security in the state and the company was unlawfully selling unregistered securities. Unsurprisingly, Seagal and the founders of the project parted ways having raised a little over $75 million. Since then, Seagal’s Twitter account has remained mostly inactive.

Paris Hilton

Image Courtesy of Paris Hilton Twitter

Seagal wasn’t the only celebrity that endorsed a controversial ICO project. Television star and hotel heiress Paris Hilton got lured into the hype too. She endorsed LydianCoin, a token promotion from a Singapore-based company that seeks to create an advanced digital marketing and advertising platform. She sent out a tweet to her followers about the newly emerging LydianCoin – an act that drew heavy criticism from pundits within the cryptocurrency community.

Soon after, the SEC discovered that the Chief Executive of LydianCoin, Gurbaksh Chahal, was involved in a domestic abuse case and was guilty of abusing his girlfriend. Chalal was facing possible jail time for violating his parole and also abusing another woman. After this discovery, Paris deleted her tweet about LydianCoin and has since not spoken about any cryptocurrency. Immediately after this, the SEC started warning investors of the risks of getting involved in ICOs especially those promoted by celebrities.

DJ Khaled and Floyd Mayweather

Image Courtesy of Floyd Mayweather Twitter

Both DJ Khaled and Floyd Mayweather got involved in a crypto-scam when they agreed to promote Centra. Centra Tech claimed that it was partnering with Visa and MasterCard to launch cryptocurrency debit cards. These cards were to give Centra customers the ability to make store purchases using their crypto-funds. Unfortunately, the SEC discovered that Centra Tech had no such partnerships with Visa or MasterCard and had made up some of their employees’ names.

Following this discovery, the founders of Centra Tech were arrested, charged, and indicted for fraud. Fortunately for both celebrities, their names didn’t appear in the lawsuit. However, the SEC has since issued several warnings against other celebrity endorsers even suggesting that celebrities risk aiding and abetting charges. Since this incident, both Mayweather and DJ Khaled have stayed clear from crypto-endorsements and stuck to other safer celebrity endorsements.

What the SEC thinks of Crypto-Endorsements

The Securities and Exchange Commission (SEC) is genuinely anxious about the increasing number of celebrity crypto-endorsements. Furthermore, based on the above content, crypto-endorsements by celebrities aren’t exactly succeeding. The SEC is, therefore, encouraging investors to do research before investing in celebrity-endorsed cryptocurrencies. The SEC also wants celebrities to know that they may be violating anti-fraud provisions of the federal securities laws for acting as unregistered brokers for ICOs.

Crypto-endorsements by celebrities may be classified as unlawful especially if the celebrity fails to disclose the amount of compensation received from the ICO company for the endorsement. SEC’s action towards Centra Tech is part of their effort to eliminate fraud in an unregulated crypto-environment. They intend to continue their focus on these types of endorsements to protect investors and to ensure that companies comply with the securities laws, an activity that’s crucial for the ever-changing cryptocurrency landscape.

Final Thoughts

Crypto-endorsements tend to confuse celebrities’ fans as they are not sure whether the celebrities are genuinely into crypto or are merely advertising it. However, based on some of the above outcomes, it seems as though celebrities rarely take the time to know the kind of ICOs they are endorsing intimately. However, not all celebrities are clueless. Some are incredibly knowledgeable and genuinely want to create a difference in the land of crypto. One thing stands true – the crypto-environment is the Wild West, and it pays to keep yourself away from the plug. Conduct your due diligence and stay away from the hype.

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