Tyra Douyon - April 24, 2023
When we think about celebrities such as Tom Brady, Madonna, Neyo, Lindsey Lohan, and Jimmy Fallon, their exceptional athletic abilities, captivating stage presence, and extensive lists of cinematic achievements are the first things that come to mind. However, for some, these accolades have become secondary as their names now take center stage in numerous class action lawsuits.
Since the inception of cryptocurrency exchanges, these companies have been facing legal action from disgruntled investors. As soon as large amounts of money, or rather bitcoin, were lost in the crypto market, people started suing those they held accountable for their financial losses. However, over the past month, influencers and celebrities associated with the cryptocurrency world have been under scrutiny for promoting unregulated securities and unstable companies. In a significant lawsuit valued at $1 billion, well-known financial influencers (some referred to as ‘crypto bros’) have been accused of failing to disclose their financial ties with the now-defunct crypto company, FTX, which has lost people thousands of dollars and for the unlucky few their entire life savings.
“Crypto Bros” is a term used to refer to a group of YouTubers who create content related to cryptocurrency and blockchain technology. They have gained a large following in recent years as interest in cryptocurrency has surged. Crypto Bros typically create videos that cover topics such as market analysis, investment strategies, and new developments in the cryptocurrency world. Many of them have become popular for their flashy lifestyles and ostentatious displays of wealth, often showing off expensive cars, luxury homes, and designer clothing.
As influencers, Crypto Bros have a significant impact on the cryptocurrency market. Their opinions and recommendations can sway the decisions of their followers, potentially influencing the value of different cryptocurrencies. As a result, they have become a new face of influencer marketing in the cryptocurrency space. While some Crypto Bros have been criticized for promoting risky investments and for their focus on materialistic displays of wealth, others have been praised for their efforts to educate their followers about cryptocurrency and blockchain technology.
For some investors, their place in the market is essential — “CoinMarketCap reports that there are approximately 22,932 cryptocurrencies, with a total market capitalization of $1.1 trillion”(Forbes). Nevertheless, YouTubers with no official credentials can now impact the value of a widely used currency and unstabilize monetary systems. This has proven to be a dangerous game for investors to play, especially those with more ambition but less emergency funding if trades fail or companies disappear.
Lawsuits in the cryptocurrency sector have been on the rise. The first federal lawsuit against cryptocurrency was presided over by the U.S. supreme court in March 2023. The justices heard an appeal from Coinbase (COIN), a popular cryptocurrency exchange corporation, to pause two class action lawsuits.
Abraham Bielski accused Coinbase of breaking the law by not reimbursing him for the $31,000 he lost to a scam. The person he spoke with falsely claimed to be a representative of PayPal and gained access to Bielski’s Coinbase account. In another case, Suski v. Coinbase, the company is accused of misleading advertising in a Dogecoin sweepstakes event. While these cases do not directly involve cryptocurrency technology, they hold significant implications for the sector, as they could set precedents for numerous crypto companies.
One key issue to consider is whether financial influencers, including celebrities working in the entertainment sector, should be legally required to disclose their affiliations with companies before endorsing their products.
The argument persists that consumers should bear the responsibility of vetting the financial advice they receive from celebrities and media personalities before acting on it. Alternatively, many others believe the influencers themselves need to have a level of accountability if they are using their status, money, and visibility as an asset to sell a product or service for another company or for themselves. Some people continue to reflect on the psychology of the issue and why it’s relevant.
The answer is simple. It began with the advent of social media and YouTube which gave anyone in the world who created an account the ability to become a household name in the niche of their choosing. The average consumer now faces a confusing dilemma. Cryptocurrency is a popular new financial system with aims to decentralize U.S. currency. The industry is backed by celebrity endorsers and people have become millionaires by investing in it. However, the costs associated with participating in this risky investment strategy are slowly becoming untenable and consumers must ask how far they are willing to be influenced in today’s modern financial hussle.
The idea of using financial influencers or creating a financial advisor persona wasn’t invented in the digital age. The original 20th-century “bros” — Dave Ramsey and Robert Kiyosaki for example, have been writing books on budgets, debt management, and investing for decades. They’ve built multi-million dollar businesses backed by their homegrown advice. Before them, we had Napolean Hill, Thomas Stanley, and Warren Buffet telling people what they should do with their money. Cryptocurrency is like the stock market in that unreliable bull and bear markets provide unpredictability for investors; however, despite the risks, the two industries are still very dissimilar at their core. With stocks, someone buys a share of a publicly traded company and builds equity. While cryptocurrency represents digital tokens in a decentralized software network often dealing with highly speculative shifts based on paid promotions.
The verdict in this case against crypto will only be solved with time. What will impact the future of influencer marketing and financial advertising as a whole heavily depends on stricter cryptocurrency laws and regulations being passed. The Securities and Exchange Commission (SEC) does have standards in regard to securities via the “anti-touting” provision which informs investors when a person who is recommending a security has a conflict of interest, but more regulations may be passed in light of these recent lawsuits. The SEC spoke out in 2022 regarding the case involving Kim Kardashian’s ad for EMAX tokens and her subsequent lawsuit. They stated that although the Instagram post included the label “#AD,” she should have “revealed how much she was paid and by whom.” Those kinds of requirements need to be taken more seriously by financial influencers continuing to market these cryptocurrencies.
In the next few years, society will truly begin to understand the impact financial influencers have on the crypto market and the financial sector. Allowing individuals to have so much control over the values within a currency system is dangerous as well as these individuals using their celebrity status to entice people to invest in unsecured asset classes. This will lead to more lawsuits and bankrupt families if more regulations like insurance protections and advertising disclaimers aren’t required.
Because crypto is classified as investment security and not a commodity like other consumer goods, influencers, and companies should seek legal advice early in their marketing plans to ensure compliance with all advertising regulations. For the average investor, it is important for individuals to do their own research and exercise caution before making any investment decisions based on the opinions of Crypto Bros or other celebrities. The value of your crypto tokens and coins definitely depends on it.
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