Charles Randell, chairman of the U.K.’s Financial Conduct Authority and chair of the Payments Systems Regulator, singled out celebrity influencer Kim Kardashian in his latest speech for endorsing a relatively unknown and unregulated token.
Fast facts
- In June, Kardashian endorsed EthereumMax, a project launched by unknown developers in May 2021. Kardashian, wife of rapper Kanye West, is an American media personality, model and businesswoman. While she revealed that it was a paid advertisement in accordance with Instagram’s rules, Randell noted that she was not required to disclose the token was created only a month earlier.
- On its website, EthereumMax features an upcoming NFT Marketplace and claims that it provides a 6% distribution of every transaction to existing eMax wallet holders just for owning it. But the claims are backed up by vague descriptions without any details about how it works. Since its launch, the token’s price has decreased by over 50% after reaching its peak price on May 30. Despite its name, EthereumMax has no connection to Ethereum founders and currently claims to have over 109,000 token holders.
- In his speech on Monday at the Cambridge International Symposium, Randell spoke about token regulation and how investors can be protected from crypto scams. He said, “When she was recently paid to ask her 250 million Instagram followers to speculate on crypto tokens by ‘joining the Ethereum Max Community,’ it may have been the financial promotion with the single biggest audience reach in history.”
- Although Kardashian currently has over 250 million Instagram followers, at the time of publishing the ad, she had 228 million followers. However, the number of her followers back in June was by no means less significant, especially since she is one of the most followed celebrities. But her ad had little to no effect on the price of eMax.
- According to Randell, the hype generated around tokens by celebrity endorsements creates a fear of missing out among consumers “who may have little understanding of their risks.” He went on to say that consumers are often “lured into the cryptobubble with delusions of quick riches, sometimes after listening to their favourite influencers, ready to betray their fans’ trust for a fee.”
- Celebrities endorsing cryptocurrencies are not a new phenomenon. Rappers Snoop Dogg, West and Akon, singer and actress Paris Hilton, and boxers Mike Tyson and Floyd Mayweather have all endorsed cryptocurrencies at some point. But some of these celebrity-endorsed coins and crypto businesses haven’t fared well. Mayweather and DJ Khaled were fined for their involvement with coin Centra, which was charged with fraud by the U.S. Securities and Exchange Commission in 2018. LydianCoin backed by Hilton, Bitcoin Direct endorsed by Tyson and Cobinhood backed by actor and comedian’Jamie Foxx have all failed. In fact, in 2018, the SEC set up a fake initial coin offering website with its own set of celebrity endorsements to demonstrate how easy it is to get catfished or pulled into Ponzi schemes and to warn people against crypto scams.
- Randell cannot claim that EthereumMax is a scam but said that hundreds of such tokens fill crypto exchanges. “These tokens have only been around for a few years, so we haven’t seen what will happen over a full financial cycle. We simply don’t know when or how this story will end, but — as with any new speculation — it may not end well,” he said. EthereumMax has also been endorsed by Mayweather and American basketballer and Hall of Fame Boston Celtics champion Paul Pierce, with British boxer and two-time world heavyweight champion Tyson Fury being the latest addition to the list.