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Michael Kern

Michael Kern

Michael Kern is a newswriter and editor at Safehaven.com, Oilprice.com, and a writer at Crypto Insider. Michael has several years of experience covering cryptocurrencies, and…

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The Wild World Of Celebrity Endorsed ICOs

Bling

The crypto-crowdfunding craze has been a double-edged sword in the wild world of digital assets. While there are, and will continue to be, plenty of great startups with game-changing technology gaining attention and much-needed cash flow thanks to ICOs, there is also a fair share of underwhelming projects offering little more than a sleek website and a celebrity endorsement in order to capitalize on the growing fundraising trend, with some even garnering unwanted attention from the SEC.

Celebrity interest in cryptocurrencies has been welcome in many cases. From Katy Perry showing off her crypto manicure to Snoop’s Blockchain Week performances, celebrity interest in digital currencies could be seen as a sign of growing acceptance. But these would-be ambassadors are walking on a fine line.

A celebrity endorsement carries weight, something that many ICOs have tried to leverage in their favor, and because of the tricky regulatory minefield being built within the space, these endorsements could land both the company and the celebrity in hot water.

Many ICOs are now labeled as securities, and these projects must comply with federal securities laws. One set of rules, in particular, is especially relevant to celebrities looking to use their clout to sell crypto.

It begins with a landmark lawsuit: SEC vs. Tobin Smith. Smith, a TV commentator was using his position to pump the price of penny stocks without disclosing the ‘nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for his endorsement.’ In the end, Smith was required to pay over $300,000 in fines and fees.

A similar pattern is unfolding in the world of cryptocurrencies.

Celebrities are taking to social media to put their weight behind a specific cryptocurrency, without taking into account the potential consequences, much less the impact of their endorsement on regular investors.

From rap stars to action heroes, celebrities are receiving undisclosed amounts of cash to make social media posts in order to garner interest in ICOs, and, generally speaking, it’s not working out very well for anyone involved.

Steven Seagal

In January this year, Steven Seagal made headlines for his endorsement of the dubious Bitcoiin ICO. The project touted itself as a ‘better’ version of bitcoin, and Seagal took to Twitter to pump interest in the project on multiple occasions, even suggesting the "coiin" would be listed on some of the world’s largest exchanges.

Steven Seagal
(Source)

Unsurprisingly, Seagal and the anonymous developers behind the ICO bailed after raising over $75 million. Leaving only this statement: “As Bitcoiin goes through the conversion phase from token to mineable coin we wish to advise that Bitcoiin will join the likes of the original Bitcoin and become a truly open source. Therefore a big thank you to the Founders and to our Brand Ambassador whom we wish all the best in their future endeavors. However, from this point on Bitcoiin will function within its ecosystem and become a genuinely anonymous cryptocurrency with no individual or individuals having control over the entity!” Related: Record Refinancing Points At Next Big Housing Bubble

And now, regulatory officials are Out For Justice – with New Jersey officials ordering a cease and desist on the project.

Seagal has yet to make a public statement regarding the exit, but the original announcement endorsing the project remains pinned on his official Twitter.

DJ Khaled and Floyd Mayweather Jr.

Boxer Floyd Mayweather and rap superstar DJ Khaled are two others that got caught up in a questionable project.

Centra Tech, a proclaimed crypto debit card company, endorsed by Khaled and Mayweather, raised over $32 million in its ICO, thanks to its claim of a partnership with Visa. Following a denial from Visa, however, the project was targeted by the SEC, and its founders, Raymond Trapani, Sohrab Sharma, and Robert Farkas were promptly charged and indicted for fraud.

Though Khaled and Mayweather were not named in the lawsuit, the SEC has issued warnings to other potential promoters, outlining the disclosure rules and even suggesting that, in cases such as Centra’s, celebrities also risk being charged for aiding and abetting.

While Centra was Khaled’s first foray into the crypto world, Mayweather is a veteran in the scene, even dubbing himself Floyd Crypto Mayweather.

Mayweather’s other notable endorsements include the Stox project, “a blockchain prediction platform,” and Hubii, “a blockchain-based decentralized content marketplace.”

Floyd Mayweather
(Source)

Paris Hilton

Hotel heiress, international DJ, and star of the acclaimed “A Simple Life” reality TV show, also jumped on the bandwagon, with the Singapore based Lydiancoin offering, a company looking to create an “intelligent marketing platform for the blockchain community.”

Related: The Key Takeaways From Blockchain's Biggest Week

The Twitter endorsement, which was deleted several weeks later, outraged many in the space, even suggesting that it could be the beginning of the end for ICOs.

Dennis Rodman

Strangely enough, the unofficial North Korean Ambassador, Dennis Rodman’s PotCoin endorsement may be the least outrageous celebrity promotion included in this list.

Established in 2014, PotCoin aims to tackle the cannabis industry’s biggest problem: banking. The company has even created its own ATMs, with over 800 in 35 different countries.

Dennis Rodman’s involvement in the project made international news in 2017 wherein PotCoin sponsored the basketball star’s latest trip to North Korea.

Dennis Rodman
(Source)

"The folks at PotCoin ... realized the importance of this trip and made it all possible for me," Rodman noted.

In addition to their sponsorship of Rodman’s ‘peace mission,’ PotCoin has also donated to a number of charities, including Healthy Hopes and Snoop Dogg’s Snoop Youth Football League.

What's Next?

As the SEC crackdown escalates, the ICO world is racing to keep up, and celebrities looking to promote a coin will have to be extra careful moving forward.

Regulation may be divisive within the cryptocurrency community, but with these endorsements and subsequent exit scams, it is clear to see why they exist. Potential investors need to take extra care when celebrities are involved. After all, not every superstar is Dennis Rodman.

By Michael Kern via Crypto Insider

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