Celebrities endorsing cryptocurrency initiatives is not a new trend.
Such crypto endorsements have triggered the crypto market to tumble a bit.
Governments worldwide are proposing drafts to prevent such events to occur.
However, as criminal activity in the industry increases, so does the possibility that influencer endorsements may trap investors into costly digital-asset schemes.
In contrast, several lawsuits have been filed against popular celebrities for promoting crypto exchanges and their services. However, the most recent episode, the FTX meltdown, charging 5-6 celebrities for brand endorsement has raised concerns about celebrity promotion even further.
So first, let's take a look at some previous events in which well-known celebrities and athletes were named in lawsuits for advocating cryptocurrencies.
In January, a lawsuit was filed in California against Kim Kardashian, Floyd Mayweather, and former NBA star Paul Pierce for using their fame to "pump" a little-known cryptocurrency called EthereumMax as part of a wider scheme to profit themselves and defraud others.
However, Kim Kardashian and Floyd Mayweather won the lawsuit alleging them of defrauding EthereumMax investors in a preliminary court verdict. Although, Kim Kardashian was fined $1.26 million to settle claims that she violated US regulations by promoting EMAX tokens.
But that's not all; after FTX's collapse, investors launched a class action lawsuit against FTX founder Sam Bankman-Fried and a number of celebrities who backed the cryptocurrency platform, including Larry David, Tom Brady, and Stephen Curry.
The proposed class action claims that FTX was a "Ponzi scheme" that improperly transferred customer assets among its affiliated entities. It charges the company and its endorsers with selling unregistered securities.
However, the verdict has yet to be delivered, and it will be interesting to watch how much fine the lawsuit will recover from these celebrities.
In addition, several other celebrities, including Matt Damon, Tom Brady, Matt James, Mike Tyson, Reese Witherspoon, French Montana, Nick Carter, and Mark Cuban, faced similar charges in 2021.
So, how has this brand advertising aided crypto investors in making profits, and what precautions could promoters undertake to reduce the likelihood of investors losing money?
This brand endorsement has made an impact on investors, both positively and negatively. Several crypto promotions impacted the price of a certain coin to skyrocket, and some led a coin to lose its momentum and hit its all-time low.
However, professional traders can easily handle such circumstances, whereas retail investors incur massive losses as a result of such events. To avert such incidents, celebrities should also be required to reveal the risks associated with that cryptocurrency or advertising.
However, if billionaire entrepreneurs such as Musk and CZ make such comments, no legal action will be taken. The community has witnessed multiple instances where Musk's comment triggered a surge in cryptocurrencies such as Bitcoin, Shiba Inu, DogeCoin, and many more.
So our argument is that if the above-mentioned celebrities were charged for crypto marketing, why won't this billionaire be charged similarly? Government agencies should have to treat each and every one equally.
Several government authorities are proposing drafts on cryptocurrency advertising that will compel influencers to fully disclose the risks associated with that product.
For example, in the European Union, a new set of rules known as MiCA legislation will mandate crypto influencers to adequately disclose the financial risks involved with the products they promote.
In the future, the crypto community will undoubtedly witness additional regulatory reforms. This set of regulations will cover everything from proper user fund management to crypto endorsement guidelines. However, only time will time what's on the menu for the broader crypto community.
What do you think, will governments issued guidelines also undertake billionaires' comments as a crypto brand endorsement? Share your views in the comment section below.
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