Earlier this month the U.S. Securities and Exchange Commission (SEC) announced charges against Kim Kardashian for touting crypto on social media while failing to disclose that she was being paid to do so. Kardashian agreed to settle for $US1.26 ($2) million, but she is far from the only major celebrity to push crypto products without making it clear that their posts were sponsored. And that’s not to mention the fact that those crypto assets later plunged in value.
We recently explained why you shouldn’t listen to “financial gurus,” and we’ve touched on similar issues when it comes to the sort of advice you can get from “experts” on TikTok. Here’s why you should also think twice before taking crypto advice (or any financial advice) from your favourite celebs.
Celebrities are required to make paid advertising crystal clear
The SEC states that celebrity promotions of investments can be unlawful if they don’t clearly disclose they are paid advertisements. This has been true for 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 crypto. Unfortunately, the “#ad” in the corner of an Instagram video often gets overlooked.
“This is a highly speculative asset class, and so when a celebrity or influencer is touting it, it’s important that the public understands that relationship, and are they getting paid? And how much they’re getting paid on their Instagram site? That’s what this was about,” SEC Chair Gary Gensler told CNBC in an interview about the agency’s charges against Kim Kardashian.
Be sceptical of crypto advice
At the end of the day, celebrities are going to give advice that’s better for them than it is for you. Here are some things to keep in mind before you follow the advice of celebrity posts, per the SEC:
- Is this investment advice actually a paid promotion? Investors should note that celebrity endorsements may appear unbiased, but instead may be part of a paid promotion.
- Do you have other reasons for this investment? Investment decisions should not be based solely on an endorsement by a promoter or other individual.
- What are their credentials? Celebrities who endorse an investment often do not have sufficient expertise to ensure that the investment is appropriate and in compliance with federal securities laws.
- Have you done your own research? If you are relying on a particular endorsement or recommendation, learn more regarding the relationship between the promoter and the company and consider whether the recommendation is truly independent or a paid promotion.
Money.com agrees “ listen to the experts who recommend doing your own research, “rather than taking the word of your favourite celebrity” who is most likely getting 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 it’s a well-informed one, and don’t let paid celebrities be your guide.
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