By Fabiola Aceves and Daniel Duque, April 25, 2023
The Security and Exchange Commission announced charges against eight celebrities for the illegal touting of crypto companies, Tronix and BitTorrent March 22. Due to these charges coming to light, the future of crypto companies is questionable.
SEC charged Tronix and BitTorrent owner, entrepreneur Justin Sun for paying celebrities who have millions of social media followers like Lindsay Lohan, Jake Paul, Kendra Lust and Lil Yachty to promote crypto from his companies without disclosing.
The sanction issued to celebrities had them pay a total of $400,000, which included fines and returning the amount they were paid to promote the currency.
Over the years, cryptocurrency has become well known and their partnership with celebrities or influencers can count as one of those important factors that makes it enticing to invest in. Yet, how reliable can it be to trust a company through the opinion by someone who has no background knowledge in finance.
Cryptocurrency has been around since 2009 and similar to the stock market, it is likely to change unpredictably.
Marketing Assistant Professor Randy Stein talked about the advantages and risks involving this type of currency.
“We are at the point where the only reasonable way to think of it is if you have a portfolio of many assets, Crypto can be one,” said Stein. “If you bought Bitcoin in 2009 you would be a happy person right now.”
A decade ago, if someone invested in cryptocurrency like Bitcoin, which had a value of less than a cent, and did not sell it, they could receive a much higher amount in return today.
Stein stated investing in cryptocurrency has changed over the years and if you are a student today with $1000, “you should not put that 1000 bucks into Bitcoin.” The current value of one Bitcoin is almost $30,000
When discussing the risks of cryptocurrency, Stein mentioned the importance of reasoning at the moment of investing in the crypto market.
“The risk is that it is entirely speculative,” said Stein. “You know the risk and because it is just a speculative thing you have to reason around good principles of reasoning to get there.”
The idea of the cryptocurrency market not having enough rules is both appealing and daunting to the public. Carrie Shu Shang, an assistant professor of business law explained one of the positive aspects of investing in cryptocurrency in current times.
“We are possibly hitting a recession very soon, people are looking for things to invest in,” said Shang. “Cryptocurrency offers an alternative because the market is less correlated with the actual economy, even if we have a downturn, we might have appreciation of values of the currencies.”
Although there are limited regulations, Shang still considers investing in cryptocurrency in the United States safer than other places.
“You are actually better protected if you’re purchasing cryptocurrency from the United States, then another jurisdiction site such as some European jurisdictions like Malta,” said Shang.
The SEC charges against these celebrities can decrease the amount of people willing to invest in cryptocurrency.
However, Shang believes there is a positive outcome from these allegations.
“Once you have more public goods, then there are going to be more charges, which also means more transparency and tightened regulatory enforcement,” said Shang.
Similar to Shang, Stein believes the SEC charges against the celebrities should not affect the credibility people show towards cryptocurrency companies.
“I think their supporters are their supporters at this point,” said Stein. “At this point they are overlapping with multi-level marketing schemes and most people know not to get involved with the multiple marketing scheme, but enough people don’t know that they continue to exist.”
Cryptocurrency is one of the more popular assets to invest in for this generation and according to a poll done by Crypto News Flash, one in four college students have invested in cryptocurrency.
This is not the case for business marketing student Daniel Demoney, who was a previous cryptocurrency investor himself.
Demoney expressed there are some benefits to investing in cryptocurrency.
“It has high risk which can be good because it can imply high return. So, if you’re looking for something volatile or exciting, crypto can provide that.”
Not everything about investing in cryptocurrency is dollars signs and easy money. Investing in cryptocurrency can have major risks. Demoney gave the example of FTX and what happened to their investors. FTX was a digital cryptocurrency company that a was sued in 2022 for using a Ponzi scheme to misuse funds and move customer money between entities.
“Take something like FTX. You know you are taking your decentralized assets and trusting this big bank, you know a company that is going to hold all your coins and they end up screwing over a lot of people,” said Demoney.
Deciding where to invest your money in should be done through careful consideration and enough background research. It should not be done simply because one of your favorite celebrities or influencers said to.
“Anything super small cap, I would say people should stay away from and I think these stories do show why,” said Demoney. “Moral of the story to me on these sorts of stories is don’t trust influencers, they have no source of financial background, not a lot of reason to push cryptocurrency other than their own gain.”
Feature image by Fabiola Aceves
