How influencers hype crypto, without disclosing their financial ties – The Denver Post

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By David Yaffe-Bellany, The New York Times Company

Logan Paul had a message for his 6 million Twitter followers: He was “all in” on a new cryptocurrency called Dink Doink.

According to the project’s creator, Dink Doink investors would receive shares of a cartoon character, entitling them to a portion of the proceeds if the googly-eyed figure ever appeared in a TV show or movie. Last June, Paul, a 27-year-old boxer and social-media influencer, praised Dink Doink on Twitter and in a public Telegram chat, before endorsing it again on his podcast, “Impaulsive.”

But by mid-July, the price of Dink Doink had plummeted to a fraction of a cent, and Paul was facing an online backlash. In his endorsements, he had failed to mention some relevant information: He and the project’s creator were friends, and they had come up with the idea for the cryptocurrency together. He had also received a large allocation of Dink Doink coins when it launched.

“I don’t know what went absurdly wrong,” Paul said in an interview. “That’s the project from hell, and I just wiped my hands of that.”

The collapse in crypto prices this month has renewed scrutiny of the celebrity marketers who sell virtual currencies to the masses. Over the last year, actor Matt Damon and comedian Larry David have starred in high-profile TV commercials for crypto platforms, trumpeting digital assets as an unmissable moneymaking opportunity. Those ads drew criticism from crypto skeptics, but they were tied to mainstream companies with hundreds of millions of dollars in revenue.

A far seedier form of crypto promotion has flourished on social media, rife with undisclosed conflicts of interest and exaggerated claims about skyrocketing profits. Celebrity influencers like Kim Kardashian and Floyd Mayweather have made millions of dollars endorsing specific and often dubious crypto investments, urging fans to buy obscure coins that quickly crashed in value, or shilling little-known collections of nonfungible tokens, the unique digital files known as NFTs.

In some cases, promoters like Paul have admitted that they failed to disclose personal or financial ties to projects advertised on their feeds, a potential violation of federal marketing regulations. And even before the crypto market’s recent downturn, a series of these influencer-backed ventures had crashed spectacularly, hurting amateur traders and prompting lawsuits that could force some celebrities to compensate investors for their losses.

“You have this shameless profiteering from celebrities and others, who aren’t at all disinterested or impartial,” said John Reed Stark, a former chief of the internet enforcement branch at the Securities and Exchange Commission. “There is a lot of potential for harm.”

Crypto entrepreneurs hire influencers to push up the value of their digital currencies, hoping to ignite the sort of online hype that briefly turned Dogecoin, a joke currency based on a meme, into one of the most valuable crypto investments.

Some promoters are not well known outside crypto circles but have large followings on social media, where they broadcast market tips, interspersed with sponsored content. Others are major celebrities like Kardashian, who is facing a lawsuit from investors over her marketing of an obscure cryptocurrency called EthereumMax.

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