US SEC Warns Celebrities Of Endorsing CryptoCurrency

Following the rise and popularity of cryptocurrencies across the world, the US Securities and Exchange Commission (SEC) has released a statement this week encouraging people to be more vigilant about these new virtual currencies despite receiving support and endorsement from various celebrities.

Initial Coin Offerings (ICOs) quickly became the talk of Silicon Valley in 2017 and has started to penetrate the celebrity circle as well. ICOs are essentially a new form of crowdfunding that run on virtual currency and are used by several startup companies to raise funds for their projects. If a project fails, the virtual coins are returned to the ‘investors’.

ICOs have grown exponentially this year and close to 270 ICOs have been launched which have reportedly raised over $3 billion through the sale of various digital coins. This was sparked by the success of several pioneers of the cryptocurrency like Ethereum in 2014, which was able to grow its initial $18 million in funds to over $1 billion in 2016. The most popular cryptocurrency as of now is Bitcoins which is currently trading at close to $7,000 for 1 BTC.

The amazing potential of the cryptocurrency has naturally drawn many socialites and celebrities. Big names like Floyd Mayweather, Paris Hilton, DJ Khaled, Jamie Foxx and rapper the Game are just some of the stars who have been lured into the new venture and have been promoting several ICOs like Centra, LydianCoin, and Cobinhood on their social media accounts.

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Although celebrity endorsements are not unusual, the SEC said that these celebrities could be potentially breaking the law by breaching rules that govern investment brokers and violating antifraud regulations. According to the SEC, the endorsements are potentially unlawful if the celebrities do not disclose that they are receiving monetary compensation in exchange for their social media endorsements. The statement was issued following the SEC’s warning in July about these ICOs potentially violating securities law.

In the statement, SEC said

The Enforcement Division and Office of Compliance Inspections and Examinations encourage investors to be wary of investment opportunities that sound too good to be true. We encourage investors to research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons.

Ever since attention has been directed towards the endorsements, Mayweather has deleted some of his social media posts promoting Centra and Hilton has deleted hers promoting LydianCoin. Some of the other celebrities, however, have acknowledged they were paid to promote the ICOs. China recently banned ICOs and Bitcoin exchanges from operating and a number of other countries are also looking at cracking down on ICOs.