“Are you interested in crypto ????” Kim Kardashian asked in an Instagram post last summer, drawing the attention of 250 million followers to a new coin known as Ethereum Max. ..
Posts by reality TV stars may have made the history of financial markets with their reach, surpassing cryptocurrency promotions and support from dozens of other celebrities. But a week after the message, the token lost 70% of its value. Prices never recovered.
Currently, these losses are part of a plan by other celebrities, including Cardassian and boxer Floyd Mayweather and former NBA player Paul Pierce, to enrich their supporters at the expense of regular investors. It is at the heart of the proceedings alleging that it has soared.
Scott, who filed the class action, and John Jasnock, Scott’s partner, said:
A complaint filed in US federal court earlier this month was before Ethereum Max proponents used a cash rush from Kardashian followers to sell a significant amount of tokens for profit and the price became a crater. Claims to have profits in his pocket.
Kardashian’s lawyer refused to comment on this allegation. “We challenge the claim and look forward to revealing the truth,” said Ethereum Max, who has nothing to do with the Ethereum network itself.
Mayweather and Pierce did not respond to requests for comment.
The proceedings occur when the explosive growth in retail transactions during a pandemic has increased the impact of celebrity support in the financial markets.
“More and more individual investors … it’s [trading] Whether it’s Reddit or Instagram, it’s based on a very non-traditional information route. These are all new, “said Professor Charles Whitehead of Cornell Law School.
An October survey by consumer research firm Cardify found that mainstream celebrities and executives are the number one source of information for cryptocurrency holders. Almost 60% of survey respondents asked these prominent individuals for information about cryptocurrencies in more than half the time.
And celebrities are becoming an increasingly important source of information on the effectiveness of volatile tokens. In a document released by Ethereum Max in October, the brand cites its celebrity and influencer marketing as token’s greatest strength.
As the digital asset market is booming, many other well-known individuals are publicly involved in the crypto battle. Actors Matt Damon, Lindsay Lohan, Steven Seagal, and director Spike Lee have a cryptocurrency partnership.
“It’s considered easy money,” said an executive at a crypto marketing agency who asked him not to name him. Price tags ranging from tens of thousands to millions of dollars. “You haven’t seen anything yet.”
Mayweather, who introduced Ethereum Max in shorts with other brands in a major battle with YouTube megastar Logan Paul in June, said in an interview at the time that the logo alone brought a total of $ 30 million. I did.
“For now, the promotion of most crypto assets is only mildly cracked down,” said Chris Chapman, a partner at law firm Mayer Brown. However, both the US Securities and Exchange Commission and the Financial Conduct Authority in the United Kingdom have warned about influencers promoting crypto coins.
According to analysts, trading activity often spikes after a celebrity message about crypto assets. May 26th, Pierce said, “@espn I don’t need you. @ethereum_max I’ve made more money with this cipher in the last month [sic] I did with y’all in a year. The next day, the dollar-based trading volume at Ethereum Max quintupled.
From May 24th to May 29th, the price of Ethereum Max soared by more than 1,400%, a record high. By June 12, prices had fallen 85%. Two days later, Kardashian shared an Instagram message. Trading activity then surged and prices eventually fell.
UK regulators have previously flagged Kardashian’s message related to Ethereum Max. In a September speech, FCA director Charles Randell said Kardashian’s Instagram post “may have been a financial promotion with the largest audience ever.”
However, despite the rapid increase in popularity of cryptographic products, regulations on their promotion lag behind traditional financial product regulations in many jurisdictions. SEC Chair Gary Gensler called cryptocurrencies the “Wild West” this summer and urged Congress to give Congress additional power to protect investors.
At the same time, consumer understanding of crypto investment lags behind their growing attention. According to a Cardify study, 70% of crypto traders have been investing in tokens for less than a year, and 85% do not fully understand their holdings.
The impact extends beyond the crypto market. According to a study by US financial app M1 Financial, more than half of American Generation Z and millennial investors have made investment decisions as a result of information seen on social media.
Cryptographic market participants predict that the role of celebrity supporters will only grow, as regulators are rushing to keep up with market hype.
The sports world, which is already deeply involved in brand partnerships, is especially concerned with the promotion of cryptocurrencies. Basketball player Stephen Curry, American football stars Tom Brady and Rob Gronkowski, golfer Tiger Woods and NFL top draft topic Trevor Lawrence are among the athletes who belong to a particular token or code exchange. It is a person. Lawrence signed a multi-year contract with the crypto management app Blockfolio prior to the draft and was paid a portion of his contract in cryptocurrencies.
Both curry and brady Cryptographic exchange FTXThe company paid $ 135 million for the Miami Heat basketball team’s stadium naming rights and received the company’s shares. NASCAR Star Landon Cassil became the first driver to be fully paid in cryptocurrency in July.
“You are a lot [crypto] Players have a lot of money in this area, “said Pam Kramer, Chief Marketing Officer of Gronkowski and Cassill’s crypto partner Voyager. She said the company’s main priority is to educate its customers, and celebrity endorsements are not their main marketing focus. But for this sector, “people who already have followers are a way to connect with viewers, or to build and deepen connections with existing viewers,” she said.
Celebrities with these broad advocates are not always well advised when it comes to highly lucrative sponsorship deals with potential legal consequences, said Whitehead of Cornell Law School. “It’s a matter of whether the advisers are familiar with securities law,” he said.
“Supporting lipstick is one thing, and promoting crypto assets is another,” Whitehead said. Given the profile of the Ethereum Max promoter and the proceedings, he said, “I hope people understand now.”
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