Earlier this week, Kim Kardashian settled charges brought against her by the Securities and Exchange Commission (SEC) agreeing to pay a 1.26 million dollar fine for illegally touting a cryptocurrency called EMAX on her Instagram account which has 328 million followers without disclosing that she had been paid $250,000 for her endorsement. She is far from the first celebrity who has endorsed various cryptocurrencies without disclosing that they had been paid for their endorsement which is a violation of federal law. Boxer Floyd Mayweather and music producer DJ Khaled also settled similar claims with the SEC.
A good question would be why anyone would buy a cryptocurrency based on the endorsement of Kim Kardashian, but the truth is that many people buy products based on endorsements of celebrities who have no special knowledge of the product they are endorsing. While this may not be a major issue if you buy a shampoo, investing large amounts of money in cryptocurrencies carries tremendous risk that should be understood before you invest.
Bitcoins and other cryptocurrencies offer great promise both for legitimate financial transactions and scammers. However, they are not simple and no one should get involved with cryptocurrencies unless they truly understand how they work. Investing in something because it appears good when you haven’t thoroughly investigated both the person offering the investment and the investment itself is a recipe for disaster. Just ask the victims of Bernie Madoff.
I have been writing in Scamicide.com about cryptocurrency scams for eight years. Scammers are increasingly taking advantage of the public’s fascination with cryptocurrencies to take old forms of scams and update them with a cryptocurrency twist. The perception of many in the public that cryptocurrencies offer an easy path to riches coupled with many people violating the cardinal rule of investing by investing in schemes that they do not understand creates a perfect storm for cryptocurrency scams.
Again, you should never invest in anything unless you have investigated the person offering the investment and the investment itself. Initial Coin Offerings or ICOs in particular are quite complicated. The SEC has warned investors to be wary of ICOs involving companies that have little financial history or are not required by federal regulations to file financial disclosures. It is also important to remember that you should never invest in something that you do not completely understand. You also may want to check out the SEC’s investor education website at www.investor.gov.
Before investing with anyone, you should investigate the person offering to sell you the investment with the Securities and Exchange Commission’s Central Registration Depository. This will tell you if the broker is licensed and if there have been disciplinary procedures against him or her. You can also check with your own state’s securities regulation office for similar information. Many investment advisers will not be required to register with the SEC, but are required to register with your individual state securities regulators. You can find your state’s agency by going to the website of the North American Securities Administrators Association. You should also check with the Financial Industry Regulatory Authority (FINRA) for information about the particular investment adviser.
Here is a link to the SEC’s warning about possible problems you can encounter when investing in Bitcoins or other cryptocurrencies.
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