Coins

Kim’s K crypto crisis: Influencer-driven coin promos add fuel to the push for regulation

Thursday, January 13, 2022 by Robinhood Snacks |
“Now let’s talk crypto” [Moment via Getty Images]

“Now let’s talk crypto” [Moment via Getty Images]

Keeping up with crypto... Kim Kardashian, Floyd Mayweather, and other celebs are being sued over promoting alt-coin EthereumMax as part of an alleged crypto scam. The mysterious coin debuted in May claiming to “bridge the gap between community-driven tokens” and legacy crypto — but provided few details.

  • Problem #1: EthereumMax’s misleading name. It has nothing to do with Ether, the second-largest cryptocurrency after Bitcoin.
  • Problem #2: EthereumMax has crashed 98% since June, which has led to allegations it’s a “pump and dump” scheme. Think: Insiders selling everything after hyping the coin.
  • Problem #3: Misleading #ad-vertising. Kim disclosed to her 250M+ Insta followers that EMax was a paid promo (FYI: she had to) but didn't discuss risks. Mayweather even accepted EMax as payment for his high-profile fight with Logan Paul.

Crypto’s Wild West… is under scrutiny. While micro-influencers increasingly promote new cryptos, celebs like Kim K have unprecedented reach. As FOMO-driven investors try to score on the $3T crypto market, a growing number of fraudsters are taking advantage. Last year, crypto crimes hit a record $14B, and scammers lured investors with trend-based coins (see: Squid Coin).

  • Regulators have warned against crypto-market manipulation for years. But crypto markets and exchanges lack the controls and fraud protections of the stock market.
  • US regulators are calling for coin issuers to be held accountable. SEC Chair Gary Gensler wants crypto to be regulated in the same way the SEC oversees stocks and bonds.
THE TAKEAWAY

Crypto scams are bad for crypto… While some argue that crypto is in the late-adoption phase, celebrity endorsements open the door to millions of new investors who might not have enough information to tell which coins are legit. About 100 new coins are created every day. Scams are further motivating regulators and investors in favor of more transparency and safeguards around crypto.

Correction: In the Snacks newsletter published on Thursday, January 13, we misstated who Floyd Mayweather fought in his high-profile boxing match. It was Logan Paul, not Jake Paul. We’ve updated the online version of the newsletter, and we regret the error.