Generally, having a celebrity endorse your product is a ‘good thing’! Advertisers will give their right arms for a famous face to front their product. In 2017, Paris Hilton, Floyd Mayweather, Ghostface Killah (Wu Tang Clan) and Jamie Foxx were among the celebrities who were most vocal about their support for crypto and ICOs and they all used their social media platforms to let their followers know what they’re doing in the crypto world.
One thing that ICOs who use celebrity endorsements need to note is that if celebrities don’t disclose if they are benefiting from making an endorsement, the Securities and Exchange Commission in the USA may view it as illegal.
And that is what has happened to Bitcoiin2Gen (B2G) ICO, which has been using Steven Seagal to endorse its offering. As reported in Cointelegraph and many other outlets, New Jersey Bureau of Securities (BoS) regulators issued a ‘cease and desist’ order on 7th March and have accused the team behind the ICO of “fraudulently offering unregistered securities in violation of the Securities Law.”
Clearly the B2G team didn’t get the memo from the SEC about the dangers of celebrity endorsements!
The BoS order focused on what it said was “the secretive nature” of Steven Seagal’s involvement with the business and its ICO. A statement from the regulators said:
“The Bitcoin Websites do not disclose what expertise, if any, Steven Seagal has to ensure that the Bitcoiin investments are appropriate and in compliance with federal and state securities laws.” And added, “Additionally, there are no disclosures as to the nature, scope, and amount of compensation paid by Bitcoiin in exchange for Steven Seagal’s promotion of the Bitcoiin investments.”
Perhaps Seagal was not the best choice of celebrity for a blockchain business, as he is better known as an actor specialising in martial arts, but then none of the other celebrities backing crypto in 2017 are immediately linked to Bitcoin or the blockchain either.
But, it is easy to see where the problem lies from a regulatory perspective. These celebrities have an enormous power over their fans, so when Steven Seagal tweeted on March 6th that B2G would shortly be listed on major exchanges, his fans will take his word as gospel. If he says, “invest in this ICO because I have” in so many words, then that is what his followers will do, and many of them will not be savvy investors who understand the risks and rewards of crypto assets. This is something that the SEC is well aware of, and now it is acting on its previous warnings.
So, whilst a celebrity may do wonders for your alcohol brand or similar consumer item, they are not quite so desirable when it comes to promoting your ICO – unless every aspect of their involvement is completely transparent and regulators can see that they are active in and knowledgeable about the blockchain and cryptocurrency.