Earlier this month, the US Securities and Exchange Commission (SEC) announced charges against Kim Kardashian for promoting cryptocurrencies on social media without disclosing that she was being paid to do so. Kardashian agreed to settle for $1.26 million, but she’s far from the only major celebrity in push crypto products without making it clear that their posts were sponsored. And that’s not mentioning the fact that those crypto assets then plummeted in value.
We recently explained why shouldn’t you listen to “financial gurus,” and we’ve touched on similar topics when it comes to the kind of advice you can get from “experts” on TikTok. This is why you should also think twice before taking crypto advice (or any financial advice) from your favorite celebrities.
Celebrities are required to make paid advertising crystal clear
The SEC declares that celebrity investment promotions may be illegal if they do not clearly disclose that they are paid advertisements. This has been true of all kinds of investment advice in the past, but the SEC’s warnings are increasingly focused on celebrities pushing assets in the highly volatile world of cryptocurrencies. Unfortunately, the “#ad” in the corner of an Instagram video often gets overlooked.
“This is a highly speculative asset class, so when a celebrity or influencer promotes it, it’s important that the public understand that relationship and do they get paid? And how much do they get paid on their Instagram site? That’s what it was all about,” SEC Chairman Gary Gensler. he told CNBC in an interview about the agency’s charges against Kim Kardashian.
Be skeptical of crypto advice
At the end of the day, celebrities will give advice that is better for them than it is for you. Here are some things to keep in mind before taking advice from celebrity posts, by the SEC:
Is this investment advice really a paid promotion? Investors should be aware that celebrity endorsements may appear unbiased, but may instead be part of a paid promotion.
Do you have other reasons for this investment? Investment decisions should not be based solely on the endorsement of a promoter or other person.
What are your credentials? Celebrities endorsing an investment are often not experienced enough to ensure that the investment is appropriate and compliant with federal securities laws.
Have you done your own research? If you trust a particular endorsement or recommendation, learn more about the relationship between the promoter and the company and consider whether the recommendation is truly independent or a paid promotion.
Money.com agrees Hear from the experts who recommend doing your own research, “instead of taking the word of your favorite celebrity,” who may be paid to tell you what some company wants you to hear. And remember that compared to stocks and bonds, crypto is particularly risky. If you’re going to take that risk, make sure you’re well informed and don’t let paid celebrities be your guide.
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