(Representational image) In India, too, cryptocurrency platforms are being heavily promoted by big Bollywood celebrities, sports stars and social media influencers.
Cryptocurrency platforms hit the headlines worldwide as CNBC reported that reality TV star Kim Kardashian and boxing legend Floyd Mayweather are being sued over allegations that they misled investors when promoting a little-known cryptocurrency called EthereumMax to their millions of social media followers.
The class-action lawsuit filed in the U.S. District Court for the Central District of California accuses EthereumMax and its celebrity promoters of working together to artificially inflate the price of the token by making “false or misleading statements” in social media posts.
Kardashian included the hashtag #ad in the message, suggesting she was paid to promote it. Meanwhile, Mayweather endorsed the token in his boxing match with YouTube star Logan Paul. EthereumMax was accepted as payment for tickets to the event, a move the lawsuit claims boosted trading volumes sharply.
The development brings to the fore the big challenge associated with the novel cryptocurrency space which remains highly unregulated in several markets, including India.
Here, too, cryptocurrency platforms are being heavily promoted by big Bollywood celebrities, sports stars and social media influencers. Despite high volatility and lack of government regulation associated with cryptocurrency, its exchanges are thriving. Flush with investor funds, crypto startups are pumping big money into advertising to attract users.
Who are the Indian celebrities promoting crypto?
Some of the known celebrities who have promoted cryptocurrencies and platforms on Instagram, YouTube, and Twitter include musicians Badshah and Harrdy Sindhu, poet Priya Malik, stand-up comedians Vir Das, Tanmay Bhat and Aishwarya Mohanraj, Bollywood actors Anupam Kher, Radhika Apte, Kunaal Roy Kapur, Manoj Bajpayee, and Disha Patani, YouTube star Ashish Chanchlani, content creators Kusha Kapila and Dolly Singh, Vishnu Kaushal, cricketers Virender Sehwag, Ishant Sharma and Dinesh Karthik.
Absence of regulatory mechanism
While there are no guidelines for cryptocurrency advertising in India, a consumer can raise a complaint under the Central Consumer Protection Act, 2019 (CCPA). The CCPA regulates matters relating to violation of rights of consumers, unfair trade practises and false or misleading advertisements which are prejudicial to the interests of public and consumers and to promote, protect and enforce the rights of consumers as a class.
The penalty box: It is possible for the CCPA to levy a penalty of up to Rs 10 lakh on the endorser of a false or misleading advertisement for the first offence. From the second breach, the endorser may be liable for a further penalty of up to Rs 50 lakh. Additionally, the CCPA may also prohibit the endorsers from endorsing any other products or services for up to one year at first instance. On subsequent breach by the endorser, this period of prohibition may be extended to up to three years.
Sajai Singh, partner, JSA, says that while endorsers are not vicariously liable for any claims on the product or services; they are expected to take all reasonable precautions and conduct appropriate diligence on the product or service before accepting an endorsement.
“These obligations and potential liabilities require celebrities to be careful not just before signing an endorsement contract, but also carefully check what is written in it. A review of the text of the endorsement is called for, to ensure that the text does not contain any unsubstantiated reference in relation to the product or service which is not backed by sufficient scientific and technical data,” he shares.
Endorsers who have in the past faced flak include Amitabh Bachchan and Madhuri Dixit for the 2015 Nestle India’s Maggie issue related to MSG content, M.S. Dhoni in 2016 in the Amrapali Leisure Park, Greater Noida, matter and fairness brand issue where Shah Rukh Khan, John Abraham, Ileana D’Cruz and Deepika Padukone were in the forefront.
Mathew Chacko, partner, Spice Route Legal, says that while celebrity endorsers may be penalised under the new Indian consumer protection law for wantonly misleading consumers, the law placed the obligation of checking/verifying the statements in the advertisement on the endorser and failure to do so could lead to fines. “…fines are nominal, though,” he adds.
The crypto code for celebrities
Traditionally celebrities used to follow the guidelines for celebrity endorsement contained in the ASCI’s Code for Self-Regulation of Advertising Content in India (“Code”). The Code expected celebrities to have knowledge of the Code and to conduct their own due diligence before endorsing a brand or service. The Code also made it the duty of the advertiser/agency to make the celebrity aware of the guidelines, and the Code. This, however, was not the law of the land but a voluntary self-regulatory guidance. So, there were no penalties for non-compliance.
Manisha Kapoor, secretary general, ASCI, says that celebrities do act as influencers to common consumers. “In April 2017, ASCI released guidelines on celebrities endorsing products and their need to do due diligence. These guidelines are directed to both advertiser and the celebrity who need to ensure that the ads do not violate any of the ASCI codes,” she notes.
Vijay Subramaniam, founder & Group CEO, Collective Artists Network believes that it is unfair to hold celebrities accountable for something that is not under their direct control.
“We build indemnities in our brand contracts in order to protect our talent when such incidents happen. It is unfair to charge only the celebrity in case of an unregulated category where other stakeholders are also involved,” Subramaniam tells Storyboard18.
While celebrities do due diligence of the company and the product they are endorsing, they will not be able to deduce if something is going wrong internally in the company. “Celebrities cannot be treated as guinea pigs as their job is to simply model the marketing campaigns of the company,” he rues.
Endorse crypto with care
The question of whether global celebrities like Kardashian and Mayweather facing lawsuits over crypto ads will deter Indian celebrities from endorsing crypto platforms and currencies, is anyone’s guess.
But more scrutiny and attention on schemes could push celebrities to endorse crypto with care.
Subramaniam believes that cryptocurrency, as a domain, is in the spotlight because of regulatory challenges and the choice to endorse it has to be backed by careful due diligence. “Though a celebrity cannot be held accountable for something that is not in their control,” he adds.
Gaming and comic content creator Mithilesh Patankar popularly known as Mythpat says that he has not actively participated in the promotion of crypto because he wants to understand the exchange much deeply before sharing it with his audiences.
“I believe crypto being an investment product/service the promoters have to be very careful while promoting it as the audiences are trusting us with their money,” Patankar says earnestly.
He adds, “The world still needs deep financial literacy about this product/service. If ever I wish to promote crypto, I would first like to make myself and my audiences fully aware, and then promote a crypto investment platform.”
Original posted at www.moneycontrol.com