Former SEC Chief Warns Social Crypto Influencers Can Be Prosecuted
May 31, 2023
Crypto & Blockchain
The Securities and Exchange Commission (SEC) of the United States is currently targeting influencers operating in the cryptocurrency industry who have engaged in the promotion of fraudulent projects and the manipulation of token prices using social media platforms. John Reed Stark, a former SEC chief, took to Twitter to issue a stern warning to crypto influencers, alerting them to the potential legal consequences they could encounter.
Stark specifically targeted crypto influencers on social media who have endorsed dubious cryptocurrency projects and actively participated in manipulating market prices, particularly during bullish market trends. He emphasized that the regulations against fraud apply universally to all forms of price manipulation, whether it involves exchange-listed securities, penny stocks, or cryptocurrencies. Stark hinted at the possible demise of the era of social media crypto influencers as a result of these actions.
Stark highlighted the brazen and audacious methods employed by numerous social media influencers to deceive unsuspecting individuals. These fraudulent activities and price manipulations predominantly occur on widely-used social platforms like Twitter, Discord, Instagram, and Reddit. Stark acknowledged that securities fraud is often more detectable and prosecutable compared to other forms of fraud, largely due to the perpetrators' visible online presence.
As an example, Stark mentioned the case of Francis Sabo, a notorious crypto influencer who faced charges in a $100 million securities fraud case involving the manipulation of exchange-traded stocks through social media platforms.
Besides Sabo, numerous instances have surfaced where crypto influencers have violated securities laws. Notably, Kim Kardashian was fined $1.26 million for promoting a fraudulent project.
Another prominent influencer facing legal action is Bitboy Crypto, who has faced public criticism for endorsing questionable projects. On March 31, Bitboy Crypto was named in a $1 billion lawsuit for promoting unregistered securities. Additionally, the SEC issued multiple subpoenas to influencers in November 2022 for their involvement in promoting Hex (HEX), Pulsechain (PLS), and PulseX (PLSX) tokens.
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