Celebrity backing can significantly influence the success of a crypto project, but it isn't always an indicator of reliability. Research shows these projects are often dubious.
Research Shows Dubiousness
According to a 2023 research paper by former United States Securities and Exchange Commission economists Joshua White and Sean Wilkoff, there is a link between celebrity endorsement of a crypto project and its potential dubiousness. The study notes that in 2019, 26% of examined initial coin offerings (ICOs) were likely scams. By 2023, this number grew to nearly 40%.
Impact on Investors and Regulation
Amy-Rose Goodey, managing director of the Digital Economy Council of Australia (DECA), stated that celebrity endorsements existed long before crypto and have always attracted consumer attention. However, celebrities should not be the sole factor in determining a project's legitimacy. Thorough research and a critical eye are crucial. In March 2023, eight celebrities, including actress Lindsay Lohan and YouTuber Jake Paul, were charged by the SEC for not disclosing they were paid to promote crypto projects. Around the same time, a class-action lawsuit was filed against influencers promoting the now-defunct crypto exchange FTX.
Fake Ads and Their Consequences
Ken Gamble, executive director and chairman of international private intelligence and cyber investigations firm IFW Global, noted that celebrity endorsements for crypto projects could be a red flag in certain cases. According to him, there is a staggering number of fake celebrity crypto ads using deepfake technology and artificial intelligence. Celebrities might not even know they have endorsed a product, as was the case with billionaire Andrew Forrest, who sued Meta in 2022 for using his image in deepfake ads to promote scam crypto schemes. The Australian Competition and Consumer Commission also launched legal action against Meta over the prevalence of fraudulent celebrity scam ads on its platform.
While celebrities can boost the popularity of crypto projects, this does not always indicate reliability. It is essential to exercise caution and thoroughly investigate all aspects of a project before investing.
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