Despite the United States Securities and Exchange Commission’s warning about celebrity-endorsed cryptocurrencies, this apparently did not stop celebrities from continually endorsing crypto, and it also did not halt the public from buying them. The statement the SEC issued explicitly cautions the public from purchasing stocks and investments backed by celebrities. According to the SEC, such endorsements could be illegal if the celebrity did not disclose that he or she was paid as well as the amount he or she was paid for – either directly or indirectly – in return for the endorsement.
The SEC also discourages investors to engage in investment opportunities that seem to good to be true. It also encourages everyone to not rely on endorsements from celebrities and instead rely on research for possible investment opportunities.
Based on these celebrity-endorsed cryptos, the SEC may be right all along
1. Floyd Mayweather’s Centra Tech issued token has been shut down
Last year, boxer Floyd Mayweather publicly endorsed CTR Tokens by posting on Twitter an image of himself holding a Centra card. The Ether-based coin CTR token by Centra Tech – a corporation with headquarters in Miami Beach, Florida – was created by its founders Sohrab Sharma and Robert Farkas. Both have been arrested and indicted on fraud charges brought by federal prosecutors and the SEC. According to the SEC, CTR Token’s creators raised $32 million from numerous investors. The creators also claimed they provided a Visa and MasterCard debit card service to allow anyone to “instantly convert hard-to-spend cryptocurrencies”. However, the SEC discovered that no relationship existed between them and Centra Tech.
Stephanie Avakian, co-director of the enforcement division of the Securities and Exchange Commission, allege that Centra Tech duped investors by promising them “new digital technologies” via a marketing campaign that lied about its connection and “partnerships with legitimate businesses.” Avakian added, “..these and other claims were simply false.”
2. Steven Seagal’s Bitcoiin 2nd Generation
The New Jersey Bureau for Securities issued a cease-and-desist order for Bitcoiin 2nd Generation, a Steven Seagal-endorsed cryptocurrency. It was just this February when the 90’s action star offered his public support to Bitcoiin when he announced he would serve as its brand ambassador. However, it was a month later when Bitcoiin was declared by the bureau as an “unregistered security.” The cryptocurrency also had no available information on its creators, causing some to accuse it as a Ponzi scheme. To add fuel to the fire, Seagal left Bitcoiin a mere month later after his public endorsement of it.
3. Paris Hilton’s LydianCoin
Paris Hilton, the reality TV star pioneer, announced on Twitter last year her endorsement of the LydianCoin – an “intelligent marketing platform for the Blockchain community powered by the DaVinci Marketing Cloud”. She declared her participation in its initial coin offering but immediately deleted this same tweet a few weeks later after LydianCoin’s founder, Gurbaksh Chahal was accused of domestic violence. A spokesperson for Hilton confirmed that the heiress is not anymore involved with the digital currency.
Though Lydian coin could be eventually classified as a security, according to research director Peter Van Valkenburgh of the cryptocurrency advocacy organization Coin Center, due to it being a common enterprise, a money investment where profit is expected, and it comes from “the efforts of a promoter or third party”, investors who associate themselves with the coin could face another risk as its founder faces four lawsuits due to his violent criminal actions towards women and racist remark addressed to his employees.
Based on these celebrity endorsements, it seems the best sign of a legitimate cryptocurrency is when celebrities themselves actually believe in what they are endorsing, and one good sign is when they stay with the ICO for the long haul and not exit from it a mere weeks after.