A new survey has revealed bleak insights into the apparent willingness of retail investors to follow digital asset advice from the social media accounts of celebrities and influencers.
According to a Morning Consult survey of 2,200 United States adults, 45% of crypto-holding respondents indicated they would be likely to seek exposure to a digital asset if it is endorsed by a celebrity, compared to just 20% of participants overall.
There were some more promising results, with three-quarters of crypto investors indicating they were likely to invest based on a family member or friend’s recommendation, while 81% would invest in response to advice from a financial advisor.
Almost 20% of all respondents and nearly one-third of crypto owners said they were aware of a post published to Kim Kardashian’s Instagram account spruiking the ERC-20 token EthereumMax (EMAX) in early June. An astonishing 19% of respondents who saw the Instagram ad admitted to having invested in EthereumMax afterward; however, they comprise just 3.8% of the overall sample.
The post and project have been embroiled in controversy ever since. The price of EMAX saw meteoric growth after being announced on May 26 as “the exclusive cryptocurrency accepted for online ticket purchasing” for the cash-grab boxing match between undefeated boxer Floyd Mayweather Jr. and YouTuber Logan Paul on June 6.
While EMAX had traded for as little as $0.00000000073 (nine zeros) prior to the announcement, news of its affiliation with the boxing event saw prices skyrocket above $0.00000085 (six zeros) by June 1 — a gain exceeding 116,000% in just one week.
EthereumMax then shed more than 99% of its value in under two weeks, after which Kardashian published an ad on June 13 to her 250 million followers that highlighted that 50% of EMAX tokens held by the project’s admin wallet had been burned.
While the token was trading as low as $0.000000076 (seven zeros) before the Instagram post went live according to CoinMarketCap, EMAX had rallied to $0.000000235 (six zeros) by June 14 — a 3,000% gain in less than two days.
EMAX has consistently trended downwards since mid-June, with the token last trading hands for $0.000000021(seven zeros) — a 91% drawdown from the local highs that followed Kardashian’s Instagram endorsement.
The incident did not go unnoticed by financial regulators, with Charles Randell, head of the United Kingdom’s Financial Conduct Authority, describing Kardashian’s Instagram post as possibly the single “financial promotion with the biggest audience reach in history.” He added:
“I can’t say whether this particular token [EthereumMax] is a scam. But social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all.”
Kardashian is not the first celebrity to draw the ire of financial watchdogs for promoting crypto assets to their social media followers and is unlikely to be the last, too.
Related: Australian Watchdog Issues Warning on Fake Celebrity-Endorsed Crypto Ads
In 2018, the U.S. Securities and Exchange Commission charged Mayweather Jr. and musician DJ Khaled for unlawfully promoting the Centra initial coin offering (ICO) the previous year.
While the SEC has warned celebrities that they must disclose paid promotions for ICOs on social media, many celebrities are now spruiking their own nonfungible tokens amid the NFT boom.