Digital currency has been a hot topic in the news this year, with everyone from celebrities to CEO’s sharing their thoughts and experiences of investing in cryptocurrencies such as Bitcoin. The focus is now beginning to shift towards Initial Coin Offerings (ICOs), with a number of high-profile celebrities causing controversy by endorsing them on social media.
What are Initial Coin Offerings and what is the issue with celebrity endorsements?
With ICOs, investors get cryptocurrency or tokens issued through a blockchain. This serves as a currency that finances a business project. If the project is successful it is likely that the value of the token will rise. One issue is that most ICOs are not regulated, with information given through a white paper rather than a prospectus that has undergone an auditing process. However, the benefit of this is that the amount of paperwork is minimised and documentation is less of a barrier to funding projects.
DJ Khaled and other celebrity endorsements
In recent months, a number of celebrities have come forward as supporters of ICO’s. World renowned music producer DJ Khaled’s instagram post received mixed responses in September this year. The producer posted an image of himself holding a ‘Centra’ cryptocurrency debit card and a bottle of vodka, alongside the caption “I just received my titanium centra debit card. The Centra Card & Centra Wallet app is the ultimate winner in Cryptocurrency debit cards powered by CTR tokens!” DJ Khaled clearly endorses ICO’s, he has promoted cryptocurrencies on his social channels several times, with Centra Tech claiming that the artist is now an official brand ambassador and partner in the company.
Other celebrities that have shown their support for ICOs include Paris Hilton, Jamie Foxx and Floyd Mayweather. Socialite Paris Hilton tweeted a promotion for the ICO Lydian Coin out to her 16.9 million followers. Lydian Coin is a cryptocurrency used by the US based startup Gravity4.
However, one issue with these social posts promoting cryptocurrencies is that the reader is usually unaware of what deal the celebrity has struck with the ICO they are supporting. It is likely that they are being paid large sums of money to speak favourably about a brand, in addition it is unclear whether the celebrity can be held accountable by financial regulators for any inaccurate information that they give.
The US Securities and Exchange commission has warned that DJ Khaled and other celebrities could be in breach of federal laws if they are not honest about their reasons for promoting an ICO. Also, The SEC warns individuals that they should never base their decision to invest in a cryptocurrency on the opinion of a promoter.
By getting involved in this matter, celebrities such as DJ Khaled risk giving poor investment advice and damaging the financial security of their followers. Is it the right of the individual to choose what companies they support, or is promoting the use of ICOs an irresponsible use of power and influence?
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