Influencer Crypto Crimes
In the digital age, currency and products are often no longer, well, tangible. The two biggest trends in investment involve cryptocurrency and NFTs (non-fungible tokens). Unfortunately, as with any new market nefarious parties quickly find ways to scam honest investors in efforts to line their own pockets for a fast and substantial payout. As crypto investments enjoy a meteoric rise crypto crime is rising just as fast. We’ll look at one of the most recent trends investors need to be aware of.
First, it’s important to understand what cryptocurrency and NFTs are. Both are digital formats used for investment. Cryptocurrency is just that, a currency, a measure of exchange for items of value. Cryptocurrency doesn’t exist in a tangible sense but is exchanged digitally. While cryptocurrencies are fungible (exchangeable with other cryptocurrencies), NFTs are exactly what the name implies, non- fungible. NFTs (digital photos, videos, or other media files) exist only on a digital platform. Purchasers of NFTs receive a unique digital file, but since each individual NFT has its own certification of authenticity they cannot be mutually exchanged for other NFTs, making them non-fungible.
The new scam involving these digital investments, involves influencers who promote investment in these items. The legality of and responsibility for the actions of some influencers is currently in question due to several lawsuits. This new market means the suitability of laws already on the books may or may not apply to these cases.
So, what’s been happening? Celebrity endorsements of products and services have been around since Eve convinced Adam to eat an apple. Influencers are the latest iteration. Social media has given everyone their own platform to promote their own ideas, and influencers are recognized by companies as having a significant following with the opportunity to sway their followers to buy certain products. Basically, anyone with enough social media followers who are influenced by that person’s promotions is an influencer.
In the crypto-investment world, some influencers have jumped in to promote certain cryptocurrencies and NFTs. No problem, right? Old gig. But what’s new is how these influencers are being compensated and their actions afterward. Two cases are at the forefront of the matter. One involves a cryptocurrency called Safemoon and several influencers who promoted investment in the digital coin. Safemoon’s creators and influencers like Jake Paul, Soulja Boy, Nick Carter, and Lil Yachty are accused of promoting what was purported to be “safe” investment as the liquidity pool was supposed to untouchable for a period of years. However, as investors were clamoring on board, inflating the cost, some of the creators and influencers who had also invested are accused of divesting the money into their own pockets in spite of the liquidity pool conditions they publicized. Courts are currently doing a bit of back and forth on whether paid promoters can be held responsible for what they promote.
The second case in question involves the sale of a collection of NFTs by a porn star named Lana Rhoades. She created a line of NFTs featuring cartoon versions of herself and assured investors she would work to promote the NFTs thus expecting them to gain substantial value, i.e., an investment. Rather than promoting the works as just art, the NFTs were specifically promoted as a long-term investment with the expectation of lucrative returns and exclusive rewards. However, within a week of the sales she dropped completely out of social media and withdrew all the funds from the project to the tune of $1.5 million claiming the platform was “too negative.” It’s unclear at this time whether there will be any legal relief for these investors.
So, by all means, feel free to allow influencers to persuade you to buy a certain brand of shoes, but do not, ever, let them convince you to spend all your savings on a get-rich-quick scheme.