The United States Securities and Exchange Commission (SEC) is intensifying its efforts to identify crypto influencers involved in promoting scam projects or manipulating token prices through their social media presence. Former SEC Chief John Reed Stark took to Twitter to warn such influencers of potential persecution.
In his tweet, Stark highlighted the numerous sketchy crypto projects promoted by social media influencers that have manipulated market prices during bull runs. He emphasized that the same anti-fraud rules apply to any form of price manipulation, be it for exchange-listed securities, penny stock securities, or crypto-securities, and that the days of these influencers are numbered.
The former SEC Chief called out the audacious and conceited manner in which many influencers deceive their victims, often using Twitter, Discord, Instagram, or Reddit as platforms to promote scams and manipulate token prices. Interestingly, Stark pointed out that the nature of securities fraud actually makes it easier to detect and prosecute, as the participants often leave a prominent online trail.
“Regulators and law enforcement need only turn on their computers to discover an extraordinary and resplendent evidentiary trail of compelling and vivid inculpatory evidence. Indeed, far from tying the government’s hands, social media has become the virtual rope that many crypto bros (and sisters) use to hang themselves,” he explained.
Stark referenced the case of Francis Sabo, a notorious crypto influencer charged in a $100 million security fraud case, who used social media platforms to manipulate exchange-traded stocks. Additionally, celebrity influencers like Kim Kardashian have been fined for promoting scam projects, and a Bitboy Crypto is named in a $1 billion lawsuit over promoting unregistered securities. In November 2022, the SEC issued a subpoena to various influencers for promoting HEX, Pulsechain, and PulseX tokens.
The ongoing crackdown on fraudulent activities in the crypto space serves as a reminder for influencers to exercise caution when endorsing projects. To maintain the trust of their followers and ensure legal safety, they must carefully vet the projects they’re promoting, avoid engaging in price manipulation, and stay transparent in their actions.