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Social Media Influencers Could Be the Next Target for the SEC

One of the reasons for the explosion of the crypto market in 2017 towards mainstream popularity is the rise of ICOs. Existing in a grey area, some crypto projects were able to raise funds without the scrutiny of regulators. But things are different today.

We’ve seen a lot of regulatory changes in the industry this year. In fact, two companies were already fined not to mention celebrities are already being targeted by the agency. You have Floyd Mayweather and DJ Khaled who were made to pay a fine of more than $700,000 for promoting ICOs that are selling unregistered securities. And also, the company behind the ICO was also charged with fraud.

Now, is there a chance that social media influencers are next? Could the same treatment be experienced by those Instagram models who promoted crypto projects and got paid for their follower?

According to the SEC last year, “Any celebrity or other individual who promotes a virtual token or coin that is security must disclose the nature, scope, and amount of compensation received in exchange for the promotion”. This only means that if the individual didn’t disclose the compensation received from the endorsement, it can be considered a fraudulent activity.

In a tweet, the SEC warned investors that “Investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements. Social media influencers are often paid promoters, not investment professionals, and the securities they’re touting, regardless of whether they are issued using traditional certificates or on the blockchain could befrauds”.

ICOs are Securities?

In the past seven months, Coinbase worked with regulators in order to be able to have no problem listing digital assets on its platform. In May, Coinbase expressed its interest to add different cryptocurrencies including Stellar(XLM), Cardano(ADA), 0x (ZRX), Zcash (ZRX), and Basic Attention Token (BAT).

Coinbase has been cautious not to commit the mistake of listing a digital asset that is considered a security by the agency. This can easily be trouble for them since they are helping to sell unregistered securities. A few months ago, Bitcoin and Ethereum were considered as commodities by the US Securities and Exchange Commission. However, the agency mentioned that most ICOs may fall under securities.

On Tuesday, Jay Clayton clarified his view on ICOs. He said “We don’t believe Bitcoin is a security. Many of the ICOs that you see and you talk about, they are securities. And if you’re going to offer or sell securities, you have to do so in compliance with our laws. We’ve been clear about that, the recent actions further emphasized that our securities laws to apply to the ICO space, and if people are going to raise money using initial coin offerings they either have to do so in private placement or register with the SEC”.

There are celebrities that have promoted cryptocurrencies. You have the likes of Ashton Kutcher that promoted XRP. This was after lawsuits were filed against Ripple. Ripple is currently facing lawsuits taken to federal court. And we still have to wait whether or not it is a security or a commodity.

 

Janneke Eriksen

Janneke is a writing ninja and has vast experience in journalism, specifically in the crypto space. As a blockchain believer and avid Bitcoin fan, she’s incredibly excited to share to our readers the latest news around so they are always updated wherever they are.

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