Reputation At Risk: Why Celebrities Face Legal Actions For Scam ICOs Promo

ICO market and cryptocurrency market as a whole suffers from negative news, feedbacks and stances. Apart from obvious scams, the market just recently realized the low level of success of the total number of startups launched in 2017, as it was recently summarized by EY. The aggressive marketing made investors — most of them private — believe in miracles. It was fueled by various marketing pressure mechanisms, including the participation of the celebrities in project promotions. We all know, that traditional advertisement actively utilizes celebrity names in promoting consumer goods and services. But it’s not so simple with the financial market. One can throw away a bottle of untasty coke promoted by their favourite actor and forget about it forever. Obviously, it’s not the same with investments.

The celebrity endorsement in ICO and similar crypto assets enterprises proves to become an unreasonable reputational risk. Moreover, it appears that legal action is in sight too, as Floyd MAYWEATHER and DJ KHALED promoting fraud ICO Centra can become the indicative case of strict legal approach. Recently they have been hit with a lawsuit from Centra investors. The two celebrities took part in the promotion campaign in September 2017. Of course, they were not the only ones involved in overhyped crypto and ICO debauchery on a global level. Numbers of celebrities supported cryptocurrency, whether it be their own coins or companies who endorsed them in some way.  

Definitely, these initiatives attracted US SEC’s attention, with a consequent public statement and a warning for potential investors in November 2017. More than that, in order to warn investors, SEC created a fake ICO called HoweyCoins with emphasised role of celebrities. The redirect takes users to a landing page with a statement that “a celebrity endorsement does not mean that an investment is legitimate or that it is appropriate for all investors.”

“Celebrities fall victims to scam ICOs for either of two reasons, or both of them: they are offered ‘millions’ in worthless tokens, and they are promised that these tokens will have value, or they are promised exposure and additional personal image promotion,” says Richard SHIBI, ICO and blockchain consultant.

“This happens in any business, not just ICO. Celebrities earn 90% of their wealth on advertisements. Mostly they never go deep into these projects, because of the great number of offers they receive,” explains Nikolay SHKILEV, PhD, blockchain expert and Top ICO/STO Advisor. “Their social media are mostly run by their PR agents, which can be fooled too. The ICO fraudsters can curry favor with them, promise huge wages and promote scams this way.”

Naivete, lack of due diligence, or… blinding greed for money?

Ignorance is no excuse. And it does not exempt a person from responsibility. Beth-ann ROTH, a former SEC prosecutor, earlier commented to FT that “[The lesson for celebrities is to] know what you’re endorsing,” regarding the situation with allegations.

Meanwhile, it’s not the first case with celebs being involved into some obscure and strange projects.

Paris Hilton earlier tweeted about newly emerging coin with the tweet consequently deleted. Later it became known that the CEO of the project had previously pleaded guilty to domestic abuse. In March 2018 Steven Seagal was also suspiciously involved into a dubious crypto startup called Bitcoiin (also known as Bitcoiin2Gen) and abandoned the project after it was hit with a cease-and-desist order. The amount of Seagal’s reward remains unknown, but a stranger thing is that the project was widely discussed by the crypto community and categorized as scam in its early stage. Could it be that the famous actor or his agent didn’t underwrite a simple evaluation and scoring of the startup? Definitely they could have done that. The question is, whether they didn’t understand what they were into, or made it consciously and wilfully? I guess, we’ll never know.

“Dishonest agents can risk with the reputation of a star they represent. Surely, they can be fired then, but what of that? I know a lot of celebrities, and they deny dozens of projects to enter a single one. But still, nobody is 100% protected from getting into fraud,” says Nikolay SHKILEV.

The lists of celebrities somehow involved into promoting cryptos and ICOs can be easily found on the Web: sport stars, musicians, actors. Of course they do it for the compensation, but does someone estimate the reputational risks when endorsing obscure projects? Or they really do estimate the risks, but still gladly sell reputation for the cash? Then the prosecution would be righteous indeed.

“MOST of the projects which reached out to celebs, were actually scam,” notes Richard SHIBI. “I think over time, celebrities are getting more cautious.The SEC has issued a PERSONAL letter to every famous celebrity in the US warning them not to fall victim as they will not be excused anymore after receiving the warning. So, over time this trick might not be working anymore, unless there is a real project behind.”

It’s not a reputation of a single person at stake. It’s about ICO industry as a whole

So the hangover from investments in ‘miraculous’ crypto projects promising fantastic returns is quite hard, and disappointed investors start looking for someone to blame. The celebrities can become scapegoats in this awkward situation. Do they understand it? I guess, Mr. Mayweather is definitely not happy to be sued. But what about the others?

Meanwhile, the establishing crypto projects understand the lowering level of trust, looking for ways to cement their reputation, and thus continue to turn to celebrities for support. Just recently, according to Hollywood Reporter, the world-renowned Johnny DEPP partnered with TaTaTu, a crypto social entertainment platform, saying that he will “look forward to collaborating together in a liberating, progressive manner that will be fit the principals of our respective entities.”

A ridiculous thing may happen in this industry: inviting a renowned celebrity into a project can lead to an opposite effect. Instead of gaining more trust, projects could be severely condemned by the crypto community. “Serious projects reach out to professionals and entrepreneurs who has real experience and can actually contribute something to the projects,” Richard SHIBI is critical. “I want to see Vitalik Buterin on a DAPP, not Madonna.”

With the maturity of the market, comes the serious approach. The investors become wary, and marketing with the star endorsements is to change as well. The role of the celebrities will turn to something new. I believe, something with less reputational and legal risks.