Cryptocurrencies’ journey this year from the moon back to Earth has slammed the brakes on a peculiar phenomenon of the 21st century: the awkward celebrity crypto endorsement.
Matt Damon, Larry David and Tom Brady have all gone quiet on crypto as advertising dollars in the industry have evaporated alongside investor interest, according to recent reports.
And Kim Kardashian couldn’t have even talked about crypto if she had wanted to, as the Securities and Exchange Commission has barred her from promoting crypto for three years.
The SEC takes notice
This latest move from the SEC serves as a reminder that Super Bowl commercials and celebrity social media accounts may not be the best source of investment advice. People who bought in at the height of the crypto craze may not recoup their investments for years — if ever — depending on the coin they bought. And some of the stars who signed on to promote risky digital assets may now wish they had steered clear.
Under Kardashian’s settlement with the SEC, the ubiquitous influencer also paid a million-dollar fine and forfeited $250,000 — which she was allegedly paid to talk up the obscure token EthereumMax through Instagram — plus interest. (Kardashian admitted no wrongdoing.)
Meanwhile, EthereumMax is trading for less than a millionth of a cent. That’s down about 99% from the high it hit shortly before Kardashian began promoting it in June 2021.
Celebrity endorsements exist throughout society, from car commercials to medical devices and political campaigns. But when Joe Montana talks up Medicare plans, the SEC won’t come knocking. Crypto, on the other hand, has been a particularly troublesome spot for paid spokespeople in part because of the sector’s reliance on hype to fuel its rapid growth — and the explicit rules the SEC has in place around this exact thing.
Pump that crypto spirit up
Early-stage crypto projects often offer influencers and average citizens rewards for promoting their project through social media. These cryptocurrency “airdrops” can be legitimate ways to get a new asset circulating in the market and to help people learn about it.
But there are sometimes darker motives in the discourse around particular cryptocurrencies. Some developers have been accused of promoting their cryptocurrencies not out of a sincere belief in the product but as a way to increase demand before selling and walking away. This is known in both SEC parlance and Reddit message boards as the feared “pump and dump.”
The SEC has had its eyes on celebrities’ crypto tips for half a decade. In 2017, the agency issued a statement urging investors to question the motives of anyone shilling digital assets.
“Celebrities and others are using social media networks to encourage the public to purchase stocks and other investments,” the SEC said at the time. “These endorsements may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.”
One year after the SEC statement, boxer Floyd Mayweather Jr. and musician DJ Khaled agreed to SEC-imposed penalties after being accused of running afoul of these rules with their own crypto projects. (They also admitted no wrongdoing.)
Fortune favors … whom?
It wasn’t until cryptocurrencies’ historic bull run of 2021 that the cryptocurrency/celebrity symbiosis really took off. As the asset class established itself closer to the mainstream, centralized crypto exchanges sought out household names to help promote their products.
Rather than pitching individual investments, this latest crop of celebrity endorsements from the likes of Tom Brady, Larry David and others took the more conservative approach of talking up crypto in general. Crypto was confusing, but cool. It was a bold, forward-thinking choice for true leaders.
In one commercial for the crypto exchange FTX, Larry David makes light of his own lack of understanding of the novel asset class. In another, Tom Brady and Gisele Bündchen call all of their friends to announce they’re “getting into crypto.”
And in a much discussed (and often ridiculed) spot for Crypto.com, Matt Damon makes the grandest of overtures as he urges viewers to put their money into crypto.
“In these moments of truth,” Damon says, “these men and women — these mere mortals, just like you and me — as they peer over the edge, they calm their minds and steel their nerves with four simple words that have been whispered by the intrepid since the time of the Romans: Fortune favors the brave.”
As it turned out, it may have been more prudent for crypto buyers to stand a little farther from the edge. Even large cap cryptos such as Bitcoin are trading at about a third of what they were worth last year.
In May 2022, with the crypto market falling like a chastened Wile E. Coyote, NBC News contacted 10 celebrity crypto spokespeople including David and Damon. None of them offered a comment.
Whatever a celebrity tells you, personal investing is usually a lot less exciting than it looks on TV. Most people are well-served by a diversified portfolio that includes a mix of different asset classes. Risky bets like crypto should generally make up just a small part of that.
Another of the sadly boring aspects of investing is that you want to think long term, and that means a bear market can be an opportunity. If you believed in the long-term value of Bitcoin when it was $60,000, you can certainly get more for your dollar now that it’s at $20,000.
After all, fortune favors the brave, right?
The author and editor both owned Bitcoin at the time of publication.
Original posted at www.nerdwallet.com