Social Influencers Promoting Cryptocurrency Should Disclose CompensationDecember 2, 2018
With several cases on Initial Coin Offerings, pending before the different courts, the SEC is cracking down on the ICOs.
The next move will be on the social media influencers who will be promoting the ICOs. This move is because the social media influencers are actually those who are taking the offerings to the public.
The current target is based on the ICO promotional fraud. There are writers, review forums, publications, celebrities and others all over the social media providing information and promotional speeches to the general public to promote the offerings.
If these social influencers have received compensation for promoting a token sale and they have not disclosed the amount they have thus obtained, the SEC will crack down on the social media if there is sufficient evidence for the same.
The social influencers who are promoting the tokens should declare the compensation they have received for the same. It has been published that “Any celebrity or individual promoting a virtual token, which is a security should disclose the nature, scope, and compensation received in exchange for carrying out the promotion.”
Not disclosing the compensation received is considered to be a fraudulent activity.
The commission previously warned the investors and the general public early on November 28, 2018, that they need to be aware of the celebrities promoting the tokens that are issued on the blockchain.
The commission has required and implied “Investors are not to be skeptical of investment advice that is published on social media platforms. They are not to make decisions based on endorsements provided by celebrities. Social media influencers are mostly paid promoters. They are not investment professionals. The securities they are promoting might not be frauds. This is irrespective of whether they are issued using traditional certificates or for those that are on the blockchain.”
If the SEC sees that the ICO is a security per the recent regulations and if the celebrity openly promotes the ICO after receiving compensation, then the individual will be considered to be a violator of the U.S. securities regulations by the SEC.
Since most of the ICOs are securities, several platforms are being very cautious to ensure that their token is not considered as a security by the SEC. This is particularly true about Coin Base. If the assets listed in an exchange are declared to be a security, then the exchange can be prosecuted for distributing the securities illicitly.