How crypto companies are able to land huge celebrity endorsements — and why that’s a problem.
Kim Kardashian is in the headlines again this week. That might not seem all that significant, given that she’s a woman who’s built an empire by deftly placing herself at the center of the national conversation time and time again. But this time, the reality star and entrepreneur has inadvertently directed the discourse toward the world of cryptocurrency, the murky rules by which the asset class is governed, and the threat that poses to consumers.
This week, the Securities and Exchange Commission announced Kardashian had agreed to pay a $1.26 million settlement for hawking the crypto token EthereumMax to her millions of Instagram followers without disclosing that she was paid $250,000 to promote it. Keep in mind, Kardashian has an estimated net worth of $1.8 billion, so for her, this fine amounts to little more than a slap on the wrist. But that’s not the point.
The point was to make a splash, says Jacob Silverman, a journalist currently writing the book, Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud, with The O.C. star Ben McKenzie. And what better way to do that than to make an example of arguably one of the most watched women in the world?
“They went for a big fish,” Silverman says. “They knew this was going to get a lot of attention. Other famous people may take this as a warning shot.”
Crypto’s star power
Kardashian posted about the token in June 2021, taking a cue from a string of other celebrities who had also hopped on the cryptocurrency train during the pandemic. Through lockdown, millions of Americans — flush with fresh stimulus money — opened their digital wallets and traded in Bitcoin or other virtual currencies. According to a Pew Research Center survey, about 16 percent of people in the U.S. have invested in crypto — up from just 1 percent in 2015.
And crypto companies hoped to seize on that momentum. They poured millions into marketing campaigns, and seemingly overnight amassed a staggering amount of star power — which was on full display at this year’s Super Bowl. Matt Damon had become the face of the Singapore-based crypto exchange Crypto.com, while Larry David and Tom Brady were shilling FTX, a Bahamian exchange.
The goal is to generate hype and to cultivate a feeling of FOMO, says Jenna Drenten, Ph.D., a marketing professor at Loyola University Chicago who studies social media and consumer culture.
“They’re trying to build this sense of urgency — that if you don’t act now, you might miss out,” she tells KCM. “It’s really recycling marketing tactics from get-rich-quick schemes or multi-level marketing scams.”
That message is literally at the heart of FTX’s Super Bowl commercial starring David. In the ad, the Curb Your Enthusiasm star denigrates groundbreaking inventions from the wheel to the lightbulb, and ultimately FTX. The spot closes with a warning: “Don’t be like Larry. Don’t miss out on the next best thing.”
Of course, brands have long recruited celebrities to lend credibility to new products. But there’s a big difference between being paid to appear in a perfume ad and encouraging consumers to trade in a highly speculative asset. If that wasn’t clear during the Super Bowl — arguably the height of the cryptocurrency frenzy — it became clear in the months that followed. In May, the crypto sector went into free fall. The price of Bitcoin plummeted to its lowest point since 2020, and a popular token completely collapsed, leaving many young, often inexperienced investors with huge losses.
“[Celebrities] do bear some responsibility for what they endorse,” Silverman tells KCM. “And what they did at the Super Bowl was to basically lead their fans to a rigged casino table.”
Even before the big game, famous folks, like Kardashian, were engaging in some pretty dubious promotions. Take Spike Lee, for example. The iconic filmmaker appeared in an ad last year for Coin Cloud, a company that operates crypto ATMs. In the spot, Lee derides the world of traditional finance as oppressive and racist — and presents crypto as the solution.
He and other Black celebrities (like LeBron James and Jay-Z) have been deployed by companies to position digital investments as a way to build Black wealth, engaging in what Silverman says is a form of affinity fraud. The term refers to scamming a particular community. That targeted marketing appears to have worked. According to a recent Charles Schwab survey, Black investors are much more likely to own crypto than white investors, and are also less likely to believe it’s a risky investment — leaving them disproportionately vulnerable.
Taming the “Wild West”
In recent years, calls have been growing for more regulation of the sector, which SEC chairperson Gary Gensler has famously compared to the “Wild West.” There’s currently a patchwork approach to oversight where “dozens of federal and state agencies are seeking to regulate crypto as it affects their jurisdiction or areas of law they administer and enforce,” says V. Gerard Comizio, a professor at American University Washington College of Law and the author of a textbook on virtual currency law.
And some see a need for a more comprehensive strategy, he says. Recently, the White House has urged the Treasury, the SEC, the Commodity Futures Trading Commission, and other agencies to step up their enforcement efforts and develop a federal framework for crypto regulation.
In the meantime, Comizio says the Kardashian settlement should have an immediate effect in civilizing the crypto frontier. In addition to the fine, Kardashian’s been barred from promoting cryptocurrency for three years. But that’s not the end of her legal woes. For hyping the token, she, along with former NBA star Paul Pierce and boxer Floyd Mayweather, was hit with a class-action lawsuit in January for her alleged involvement in a pump and dump scam.
This should serve as a cautionary tale for other big names looking to make some easy money through a crypto deal, says Silverman, who expects more cases like Kardashian’s to come.
