Stay updated on trending legal insights and get our attorneys' take on the latest industry news. Paul Zimmerman pzimmerman mrllp. While cryptocurrency remains a new concept for many investors across the globe, more and more people are becoming familiar with the digital asset class.
This is not only a result of the constant drumbeat of crypto-related headlines in the media, but also because of the personalities touting the potential for riches from Bitcoin, Ethereum and the like. In fact, a much younger audience of would-be crypto tycoons is being reached by virtue of the individuals being paid to advertise digital coins and exchanges. Even Kim Kardashian West has jumped on the bandwagon. She has posted ads for Ethereum Max—a speculative digital token created by unknown developers—on her Instagram stories, and these have been viewed tens of millions of times.
Given what appears to be a modicum of crypto endorsement mania, those in the limelight doing the promoting must be well aware of potential legal exposure as a result of oversight by the U. Securities and Exchange Commission. The SEC has had its eye on cryptocurrency endorsements for years now.
The cases against Mayweather and Khaled were the first to charge promotional violations involving ICOs. Of note, their unlawful promotion of the ICOs came after the SEC issued a report in suggesting that altcoins may be characterized as securities subject to federal securities laws, including the applicable anti-touting provisions of the Securities Act of Pursuant to Section 17 b of the Securities Act, potential investors must be able to discern whether an endorsement has been paid for or is coming from a disinterested party.
Clearly, Mayweather and Khaled crossed the line by not disclosing their financial interest in promoting the ICOs they peddled, which drew the scrutiny of the SEC. Influencers now endorsing crypto products should learn from their mistakes.
They should also pay heed to ongoing SEC messaging. Bottom line: talent and social media mavens alike should be cautious when considering attaching their names to any security offerings, including those involving crypto. It is incumbent upon them and their representatives to do their due diligence; thoroughly vet the digital assets or exchanges they may promote; consult with legal professionals about the weight of SEC scrutiny and the possibility of exposure for violating securities laws; and always disclose any financial incentive they may receive for their endorsements.
This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations. Subscribe to Our Monthly Newsletters. Business Litigation.
Financial Services. Affordable Care Act. Hotels and Resorts. Intellectual Property. Damon is selling the services of Crypto. These crypto ads are everywhere. Facebook recently reversed its long-standing ban on crypto ads. Both Crypto. The Crypto. And if bravery entails investing in assets with little to no transparency, crypto investments are indeed a profile in courage. Investors have legal recourse if they have been lied to or otherwise defrauded. None of these apply to crypto.
But the coins associated with these blockchains cannot transfer fractionalized ownership in a company or else they become securities. In , the US Securities and Exchange Commission cracked down on initial coin offerings, or ICOs, after it determined they represented unregistered securities. Still, cryptocurrencies have become extremely popular investments for speculators—and not just retail investors.
The crypto market has been flooded with institutional investors in recent years including hedge funds , pension funds , and endowments. Banks and venture capitalists are digging in too. He likened investing in crypto to being an angel investor in an early-stage startup knowing your investment could go to zero.
The riskiest crypto products have no white paper or no real business purpose, Venugopal said. Meme coins like Dogecoin and Shiba Inu coin have become the 12th and 13th most valuable crypto by market capitalization in no small part due to tweeting by another celebrity, Tesla CEO Elon Musk. A Musk tweet matters because the price of crypto assets are often not tied to financial performance.
One recent study from Yale and the University of Rochester found that crypto prices are primarily driven by two factors: trading momentum and investor attention. Hype, in other words. The price of cryptocurrencies in the study—Bitcoin, Ether, and Ripple—were uncorrelated with movements in traditional asset classes like stocks, currencies, and commodities.
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are among recent celebrities in the hot seat for their crypto promotions, accused in a lawsuit filed earlier this month in California of using their fame to “pump” a little-known cryptocurrency called EthereumMax as part of a larger scheme to profit. dann.hutsonartworks.com › news › these-are-the-celebrities-promoting-crypto-ev. Kim Kardashian West and Elon Musk are among the celebrities endorsing crypto products, raising concerns that the unwary will invest.