John Reed Stark, a former director at the United States Securities Exchange Commission (SEC), has issued a warning to social media crypto influencers on Twitter, alerting them to the potential consequences of their actions.
Attention all crypto promoters who use social media to manipulate the price of crypto-securities: Fail not at your peril. Not only will you eventually get caught, but your prosecution will also be like shooting fish in a barrel.
Whether manipulating the price of exchange… pic.twitter.com/AfKROIlR0N
— John Reed Stark (@JohnReedStark) May 30, 2023
In a tweet posted on May 30, 2023, Stark condemned the activities of social media influencers, emphasizing their endorsement of questionable cryptocurrency projects and their involvement in market manipulation, particularly during bullish market periods. He stressed that regulations against fraud cover all forms of price manipulation, whether it pertains to exchange-listed securities, penny stocks, or digital currency assets. Stark also predicted that the era of social media crypto influencers is coming to an end.
Stark drew attention to the audacious and arrogant tactics employed by many influencers as they targeted unsuspecting victims. He highlighted that most price manipulation and promotional activities occur on popular social media platforms like Twitter, Discord, Instagram, and Reddit. He also noted that, unlike other types of fraud, securities fraud is easier to identify and punish, as the perpetrators often fail to conceal their identities.
The former SEC chief referenced the case of Francis Sabo, a prominent cryptocurrency influencer accused of defrauding the government of a staggering $100 million through the manipulation of exchange-traded stocks on social media platforms.
According to Stark, regulators and law enforcement agencies have a wealth of compelling evidence readily available on their computers that incriminates those involved. He noted that social media has unwittingly become a virtual tool for crypto enthusiasts to expose themselves rather than hindering the government’s efforts to combat such activities.
Several other cryptocurrency influencers have also faced allegations of securities law violations. Kim Kardashian, for example, was fined $1.26 million for endorsing a fraudulent project on Instagram without disclosing her $250,000 compensation. Bitboy Crypto, a YouTuber and influential social media figure, received public backlash for endorsing questionable projects and was hit with a $1 billion lawsuit on March 31, 2023, for promoting unregistered securities.
Meanwhile, social media influencers in the United Kingdom have been advised against promoting dubious investment schemes on social media platforms. The UK Financial Conduct Authority (FCA) and the Advertising Standards Authority (ASA) jointly released a statement on April 6, 2023, emphasizing the need for caution when endorsing such ventures, particularly in relation to cryptocurrencies and non-fungible tokens (NFTs). The FCA and ASA provided a comprehensive seven-point checklist for financial influencers to follow in order to ensure compliance with legal obligations.
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