“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. ..
The messages of reality TV stars may have made financial market history with their reach, surpassing cryptocurrency promotions and the endorsement of 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. She is at the heart of the proceedings alleging that she flew away.
Scott, who filed the class action lawsuit, and John Jasnock, Scott’s partner, said:
A lawsuit filed in US federal court earlier this month came before Ethereum Max proponents used a cash rush from Kardashian followers to sell a significant amount of tokens for profit and the price has become a crater. Claims to have profits in his pocket.
Kardashian’s attorney declined to comment on this allegation. “We dispute this claim and look forward to revealing the truth,” said Ethereum Max, which has nothing to do with the Ethereum network itself.
Mayweather and Pierce did not respond to requests for comment.
The proceedings come as the explosive growth of retail transactions during a pandemic has heightened the impact of celebrity endorsements on financial markets.
“More and more individual investors…it’s [trading] Whether it’s Reddit or Instagram, it relies on a very untraditional information journey. These are all new,” said Professor Charles Whitehead of Cornell Law School.
An October survey by consumer research firm Cardify found that celebrities and traditional leaders are the top source of information for cryptocurrency holders. Nearly 60% of survey respondents asked these prominent figures for information about cryptocurrencies more than half the time.
And celebrities are becoming an increasingly important source of information about the effectiveness of volatile tokens. In a document published by Ethereum Max in October, the brand cites its celebrity and influencer marketing as the token’s greatest strength.
While the digital asset market is booming, many other well-known people 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 it. Price tags ranging from tens of thousands to millions of dollars. “You have not seen anything yet.”
Mayweather, who showcased Ethereum Max in shorts along 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 in a total of $30 million. . I did.
“Right now, the promotion of most crypto assets is only mildly suppressed,” said Chris Chapman, partner at law firm Mayer Brown. However, the US Securities and Exchange Commission and the Financial Conduct Authority in the UK have warned against influencers promoting cryptocurrencies.
Trading activity often spikes after a celebrity post about crypto assets, analysts say. On May 26, Pierce said, “@espn I don’t need you. @ethereum_max I made more money with this crypto last month [sic] I did it with you in a year. The next day, dollar trading volume at Ethereum Max increased fivefold.
From May 24-29, the price of Ethereum Max soared over 1,400%, a record high. By June 12, prices had fallen by 85%. Two days later, Kardashian shared an Instagram post. Trading activity then surged and prices eventually fell.
UK regulators have already flagged Kardashian’s message regarding Ethereum Max. In a speech in September, FCA Director Charles Randell said Kardashian’s Instagram post “may have been a financial promotion with the biggest audience ever.”
However, despite the rapid rise in popularity of crypto products, regulations on their promotion lag behind traditional financial product regulations in many jurisdictions. SEC Chairman 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 investing is lagging behind their growing attention. According to a study by Cardify, 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 US Gen Z and Millennial investors have made investment decisions as a result of information seen on social media.
Crypto market participants predict that the role of celebrity supporters will only grow as regulators race to keep up with the market hype.
The world of sport, already very involved in brand partnerships, is particularly concerned by the promotion of crypto-currencies. Basketball player Stephen Curry, American football stars Tom Brady and Rob Gronkowski, golfer Tiger Woods and top NFL draft subject Trevor Lawrence are among the athletes who belong to a particular token or code exchange. It’s a person. Lawrence signed a multi-year contract with crypto management app Blockfolio before the project and received part of his contract in cryptocurrencies.
Curry and Brady Crypto exchange FTXThe company paid $135 million for the naming rights to the stadium of the Miami Heat basketball team and received the shares of the company. NASCAR Star Landon Cassil became the first driver to be paid entirely in cryptocurrency in July.
” You are many [crypto] Gamers have a lot of money in this,” said Pam Kramer, Chief Marketing Officer of Gronkowski and Voyager, Cassill’s crypto partner. She said the company’s main priority is to educate its customers and that celebrities are not their primary marketing focus. But for this industry, “people who already have subscribers are a way to connect with viewers, or create and deepen connections with existing viewers,” she said.
Celebrities with such broad advocates aren’t always well advised when it comes to high-profit endorsement deals with potential legal ramifications, said Whitehead of Cornell Law School. “It’s about whether 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 process, he said, “I hope people understand now.”
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