The well-known businesswoman and celebrity kim kardashian advertised the EthereumMax token on Instagram to his over 350 million followers. Right then it kept increasing in value so what could go wrong? Well, in a market as volatile as that of cryptocurrencies and tokens (digital assets), everything. The promotion caused its initial value to increase by 1,300% before plummeting to an all-time low a month and a bit later.
That is what a lawsuit filed with the Central District Court of California alleges, to which the Reuters agency had access. It states that “company executives, in collaboration with several famous promoters” made “false or misleading statements to investors about EthereumMax through social media advertisements and other promotional activities.”
The strategy of paying known people to attract clients has been quite frequent since the pandemic. According to The New York Times, an NFT (non-fungible token) project called Hive Investments paid more than €370,000 to celebrities for getting involved. In this way they managed to get their followers to invest quickly and massively in a specific cryptographic asset. The value rose exponentially, the fastest resold them and sank when they had already won.
It was something that the basketball player also did Paul Pierce. In exchange for his tweets endorsing EthereumMax tokens, he received 15 billion of these coins (nearly 13 million euros at its peak). As soon as they rose in value, he sold them, according to the lawsuit. The boxer is also accused Floyd Mayweather Jr. They all made millions of dollars.
Basketball player Paul Pierce received almost 13 million euros in tokens for his promotional tweets
The influencer and boxer Logan Paul praised on Twitter and in his podcast a new cryptocurrency called Dink Doink forgetting to mention that he was a friend of the creator, that the idea had been theirs and that he had received a large allocation of these coins when they were launched. They also collapsed.
to the actor Matt Damon and the comedian Larry David they starred in television advertisements for crypto platforms. They and many others influencers, athletes and various stars have encouraged millions of people around the world to invest in digital assets with the promise that they would earn a lot of money. The problem is that, as the president of the European Central Bank said, Christine Lagarde, “There are people who do not understand the risks, who will lose everything.” And that has happened.
Spain is already getting the batteries
In Spain there is the case of the former Barça player Andres Iniesta, who posted a tweet showing that he was “learning how to get started with cryptocurrencies.” She accompanied the message with three photos of her. Either she was posing or running the Binances platform.
The National Securities Market Commission (CNMV) made it ugly in good manners. He told you that these unregulated products have relevant risks. For this reason, it was best to “be thoroughly informed before investing in them or recommending others to do so.” He also received responses about the problems that can arise from advertising that sounds to many like gambling (and the addictions that have led to it).
To heal in health, in Spain the first European regulation that regulates advertising in the sector has already been published. The Cryptoactive Publicity Circular states that influencers They must warn that they pour advice on these products in exchange for some type of compensation.
In addition, all commercial communications must inform about the risks of the product they advertise with the following warning: “Investing in crypto assets is not regulated, may not be suitable for retail investors and the entire amount invested may be lost.” And they must do so in a visible and relevant place within the advertising, whatever its form.
They also have to include a link that leads to those risks with a text that encourages them to read them. “The language must be clear and the content truthful, understandable and not misleading,” say CNMV sources.
A European regulation demands the ‘influencer’ to notify if he receives remuneration for an opinion that is at risk
Advertising or not?
If there is no consideration in exchange for that publication, they would not be subject to the circular. But, as the CNMV explains, if the activity is limited to giving investment recommendations, “influencers must present them objectively and be clear with their identities. And they must “disclose all relationships or circumstances that could affect their objectivity, conflicts of interest, etc.”
Frank Carreras, professor of Digital Marketing at Esade, explains that there are two kinds of influencers: those who promote what they are paid for and are recognized for, and those who intend to use their influence to profit from their followers. In the second group includes trainers and mentors who take a commission for each investment they get.
“Shortly before the pandemic there was a rising tide; and when it goes up, everyone wins. The one who arrives late believes the one who has been the longest, has won and has a voice -explains Carreras-. The message is compelling and tempting to the uninformed person.”
But that tide began to ebb, leaving many people naked. “There are those who have lost more than they were willing to lose,” he says. Now they feel cheated. Carreras regrets that this has harmed “all legitimate and valid uses of the blockchain and bitcoins.”
The expert points out that in the US people have a more investment culture. Even on comedy shows they make financial jokes. In Spain, no. But the gateway to these investments is much more accessible now thanks to technology, which is mainly reached by young people. Added to that is the promise of easy money from their idols at a difficult financial time. “A perfect storm,” according to Carreras.