The SEC has started clamping down on crypto influencers, issuing several fines and cease and desist orders in the past few years.
The United States Securities and Exchange Commission (SEC) is pursuing crypto influencers who have promoted scam projects and are found to be manipulating the prices of certain tokens via social media. Former SEC chief John Reed Stark took to Twitter to warn crypto influencers to be ready to face prosecution.
Attention all crypto promoters who use social media to manipulate the price of crypto-securities: Fail not at your peril. Not only will you eventually get caught, but your prosecution will also be like shooting fish in a barrel.
Whether manipulating the price of exchange… pic.twitter.com/AfKROIlR0N
— John Reed Stark (@JohnReedStark) May 30, 2023
In his tweet, Stark called out social media crypto influencers who shilled numerous sketchy crypto projects and often helped them manipulate market prices during the bull run. He warned that for any form of price manipulation — be it the price of exchange-listed securities, penny stock securities or crypto securities — the same anti-fraud rules apply, and the days of social media crypto influencers are numbered.
The former SEC chief drew attention to the brazen and arrogant way in which so many social media influencers grift their victims. Most shilling and price manipulation occurs via social media platforms like Twitter, Discord, Instagram or Reddit. Stark noted that the nature of securities fraud makes it easier to detect and prosecute, unlike other forms of fraud where the perpetrator often tries to hide behind their identity.
“Regulators and law enforcement need only turn on their computers to discover an extraordinary and resplendent evidentiary trail of compelling and vivid inculpatory evidence. Indeed, far from tying the government’s hands, social media has become the virtual rope that many crypto bros (and sisters) use to hang themselves.” Stark explained.
Stark cited the example of notorious crypto influencer Francis Sabo, who was charged in a $100 million securities fraud case and used social media platforms to manipulate exchange-traded stocks.
Apart from Sabo, there have been numerous instances of crypto influencers found to have violated securities law. The most famous case is Kim Kardashian, who was fined $1.26 million for promoting a scam project.
Another major influencer to face the law is Bitboy Crypto, an influencer who has met a lot of public ire for promoting shady projects. On March 31, the YouTuber was named in a $1 billion lawsuit for promoting unregistered securities. In November 2022, the SEC also issued multiple subpoenas to influencers for promoting Hex (HEX), Pulsechain (PLS) and PulseX (PLSX) tokens.