Kim Kardashian West has been blasted by the head of the UK’s Financial Conduct Authority (FCA) for an Instagram ad asking her 250 million Instagram followers to speculate on cryptocurrency.
In a speech for the Cambridge International Symposium on Economic Crime, FCA chair Charles Randell highlighted the risks of investing in the technology, particularly new coins backed by celebrities.
That hype could cause consumers with little understanding of the risks associated with cryptocurrencies to purchase due to the “powerful fear of missing out”.
“There is no shortage of stories of people who have lost savings by being lured into the crypto bubble with delusions of quick riches, sometimes after listening to their favorite influencers, ready to betray their fans’ trust for a fee,” Randell said.
Kardashian West disclosed her social media post was an advert, as she was required to do by Instagram, but there was nothing to indicate how new the token was.
“She didn’t have to disclose that Ethereum max, not to be confused with Ethereum – was a speculative digital token created a month before by unknown developers – one of hundreds of such tokens that fill the crypto-exchanges,” Randell continued.
Ethereum is the second most popular cryptocurrency behind bitcoin but, beyond the similar name, there is no connection between it and ethereum max.
“Of course, I can’t say whether this particular token is a scam,” Randell said.
“But social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all.”
It’s been previously reported that Kardashian West’s fee for social media adverts generally runs between US$300,000 to US$500,000 with a potential to reach US$1 million.
In the post, she asked if her followers were into crypto, saying “this is not financial advice but sharing what my friends just told me about the ethereum max token!”.
She then invited them to swipe up “to join the e-max community”.
The FCA says cryptocurrencies aren’t regulated so anyone investing isn’t covered by the Financial Services Compensation Scheme so people should be prepared to lose all their money.
New Zealanders have been given similar advice, with Aotearoa’s Financial Markets Authority (FMA) saying cryptocurrencies are speculative and high risk, and Kiwis should only invest what they can afford to lose.
Using a New Zealand-based trading platform does give Kiwis a level of protection as they must be registered on the financial service providers register (FSPR) and belong to a dispute resolution scheme, the FMA says.
However, that won’t help if the cryptocurrency someone invests in turns out to be worthless, or worse, a scam.
Ethereum max, which was also promoted by former NBA star Paul Pierce and boxer Floyd Mayweather, briefly spiked in popularity around the time it was being advertised by the influencers.
At its peak each max coin was worth US$0.000000597636 but since then has lost over 95 percent of its value and is now trading at just US$0.000000027158, according to CoinGecko