The Securities and Exchange Commission (SEC) issued an Investor Alert: Celebrity Endorsements from its Office of Investor Education and Advocacy (OIEA). “It is never a good idea to make an investment decision just because someone famous says a product or service is a good investment,” the statement scolded.
Also read: UK & Taiwanese Regulators Weigh-in on Bitcoin Laundering, France ponders ICOs
SEC Warns Against Celebrity Endorsements
“Celebrities, from movie stars to professional athletes, can be found on TV, radio, and social media endorsing a wide variety of products and services,” the OIEA post read, “sometimes even including investment opportunities.”
The advisory is full of seemingly common-sense statements, but it does come on the heels of an initial coin offering (ICO) phenomenon whereby celebrities from Floyd Mayweather to DJ Khaled are pushing ICOs.
“But a celebrity endorsement does not mean that an investment is legitimate or that it is appropriate for all investors,” the statement continued. “Celebrities,” the SEC understands, “like anyone else, can be lured into participating (even unknowingly) in a fraudulent scheme.”
“Also, celebrities are sometimes linked to products or services without their consent so the celebrity may not even have endorsed the investment,” the statement details, as in a recent case where crypto celebrities, according to Forbes, were apparently used by Alex Tapscott’s firm without their knowledge.
The agency lists three steps investors should consider: “Check out the background … through the SEC’s Investment Adviser Public Disclosure (IAPD) database,” carefully read “any prospectus and the company’s latest financial reports,” and consider “the investment’s potential costs and fees, risks, and benefits,” the post highlights.
Finally, never “make an investment decision based solely on a celebrity endorsement,” the agency urges.
Enforcement
The SEC isn’t just warning about possible celebrity scams, it’s also going after ICOs that claim to be backed by real estate or diamonds.
It is launching a civil complaint against Recoin Group Foundation LLC and DRC World Inc., in conjunction with criminal charges brought against Maksim Zaslavski who is alleged to have claimed such backing for new cryptos.
As bitcoin’s valuation continues to reach new highs, it does appear more and more scams are going to increase as well.
Are celebrity endorsements worthwhile in the crypto ecosystem? Tell us in the comments below!
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