In a Public Statement that was issued on November 1, 2017, the U.S. Securities and Exchange Commission (SEC) issued a warning, specifically to celebrities and people using social media to promote special offers, that are encouraging people to invest in stocks and similar investments that they were purportedly advocating. The reason that they issued this warning was because it is unlawful to do so, especially when they are not willing to disclose the source of the information, the nature of the investment, or the amount they had been compensated to make the endorsement for a company that they were supposedly representing. Specifically the SEC, and its Office of Compliance told people to be very leery of investment opportunities, especially those that were considered far too good to be true. There are investors that do have legitimate investments, that do not rely upon the endorsement of icons, sports figures, or artists of any kind, that may provide a much better ROI.
Initial Coin Offerings were some of the ones the SEC were targeting, specifically those endorsed by certain celebrities. The SEC’s report of investigation, specifically referencing The DAO, warned against coins and virtual tokens that were promoted as securities because they still have to be compliant with federal securities laws. It is because of this that every celebrity must disclose the nature of the investment, how large the investment will be, and how much compensation will actually be received when they are promoting these different investments for businesses. If this is not disclosed, anti-touting provisions will be violated, specifically those related to federal securities laws. This will make celebrities, and any others that are promoting these suppose it investments, liable for violations, as well as for participating in the unregistered sale and offering of securities, plus for acting as if they are brokers. The SEC will always focus on promotions of this type in order to protect potential investors, and also to make sure that everyone doing so is compliant with each and every security law.
Every investor needs to realize that celebrity endorsements, although they may appear to be unbiased, or more than likely nothing more than a paid promotion. Any investment decision that an individual makes, based solely upon someone promoting these offers, should always be avoided. As is commonly known, celebrities will likely have very little expertise in regard to the veracity of any type of investment, and will likely be unaware of federal securities laws that they may be violating.
You must always do proper research before making any investment, and this includes ICOs. When you are actually relying upon these individuals to make your decision, you must first learn more about why they are representing these companies to make sure it is not merely a paid promotion. You can get more information from the Investor Alert, something provided by the SEC, specifically from the Office of Investor Education and Advocacy which directly addresses these topics.