What the Crackdown on Celebrity Endorsements of Cryptocurrencies Tells You

by Jim Beviglia
on December 4, 2018
10

Minute Read

Floyd Mayweather Jr. and DJ Khaled recently paid fines to the SEC for their illegal endorsement of cryptocurrency coins. The incident demonstrates the hazards of choosing cryptocurrency coins as investments based on the wrong factors. Learn about the incident, what it means for investing in cryptocurrency, and how it also applies to the world of internet gambling.

It hasn’t exactly been a slow news week (when is it ever these days), so you might have missed a little item about music star DJ Khaled and boxer Floyd Mayweather Jr. This item wasn’t good news for the two well-known celebrities: They were found to have been in violation of SEC (Securities And Exchange Commission) rules regarding their involvement with cryptocurrencies.

The gist of the case came down to the fact that DJ Khaled and Mayweather talked up several new coin offerings. Both were cited for their dealings with Centra Tech Inc., while Mayweather also had involvement with other coins for which he was reprimanded.

They did so on their social media accounts by making it seem like they were investors in the products and thought they would be good investment opportunities for their followers as well.

Unfortunately, they did not make it clear that they were actually paid endorsers of these companies.

And since the SEC has cracked down on cryptocurrencies lately, especially those that seem to be a bit shady about their dealings with their customers, the involvement of the celebrities caught their attention.

The overall effect on Khaled and Mayweather will likely be negligible, since all they had to do was pay back the money that they received in their dealings with these fledgling companies. No criminal charges appear to be forthcoming, and their only other reprimand is a temporary hiatus that they must observe before talking cryptocurrencies up again.

But the whole affair is an excellent jumping-off point for those who might be considering getting involved with cryptocurrencies themselves. It could be tricky to pick your way through that brave new world without getting snagged by scammers and false advertisers. Considering that your hard-earned investment money is at stake, it’s a mistake you don’t want to make.

In this article, we’ll talk about what it means when a company offers coins as investments to the public. We’ll also talk about the warning signs that should alert you to the fact that this company might not be on the level. And we’ll also touch on how you should do your due diligence before getting involved with many of the websites that offer you the opportunity to gamble with cryptocurrency as your bankroll.

New Cryptocurrencies

The world of cryptocurrency is getting more and more crowded every day. Ever since Bitcoin exploded in value in 2017, it seems like every entrepreneur with a new idea is trying to make that idea happen within the cryptocurrency realm. Some of these entrepreneurs are legitimate and really deserve your attention; others are looking to do nothing more than line their own pockets.

Think of it in terms of the internet boom at the start of the millennium. Many investors were lucky enough to latch on to companies that actually had excellent ideas about how to take advantage of the freedoms and capabilities that the internet provided. Others were burned by those who latched onto the internet boom without any real idea that had any worth behind it.

Much of the same is now happening within the realms of cryptocurrencies. And, after a grace period in which regulators stayed beyond arm’s length with the digital coins until they saw what would transpire, the governments of the world and their regulatory arms like the SEC, are now getting more intimately involved with the proceedings.

In the case of Khaled and Mayweather, the SEC was targeting the practice of having celebrity “influencers” tout one of the coins. Like in any industry, having a celebrity in your corner is a way to break through the clutter of competition and make a name for yourself in the market. DJ Khaled and Floyd Mayweather, as titans of their respective fields and with large social media followings behind them, were obvious choices.

The problem comes from the fact that cryptocurrencies, at least the ones with which these two celebrities are involved, aren’t just your average products that one might endorse. They are qualified in a different category by the SEC, and that’s where the involvement of Mayweather and Khaled crossed some legal lines.

ICO’s and Securities

If you have ever dealt with the stock market in an active fashion, it’s likely that you have come across the phenomena known as IPO’s. IPO stands for Initial Public Offering, and it is the way that a company offers stock to the public for the first time. For the price of a share, an investor essentially gains a small piece of ownership of that company and profits if and when the shares become more valuable.

An ICO, or Initial Coin Offering, is the equivalent in the cryptocurrency world. When someone wants to start up some sort of business initiative in the cryptocurrency realm and needs investing help to get it started, they will often create their own coins that are meant for the project. But there is a distinction to draw when it comes to these coins.

You might encounter ICO’s that offer coins for utility. These coins would allow the buyer to use them within the confines of whatever that project might entail. In the case of utility coins, the SEC usually allows them to pass without much regulation.

Where it gets tricky is when a company offers up coins for a project that hasn’t yet come to fruition.

The receivers of these coins won’t really have any way to use these coins until that project gets rolling, and there is no guarantee that they will actually be usable once the project does get underway. But the investor would buy coins like these in the hopes that they will be in high demand if the project eventually does become a success, making the coins more valuable.

If that sounds familiar, it’s because it is pretty much the same thing that happens with an IPO, only an IPO puts stock up for sale instead of digital coins. Well, we know that the SEC regulates IPO’s, making sure that the company in question meets all the regulatory requirements before they are allowed to proceed. And that’s what is beginning to happen with the ICO’s as well.

These kinds of value-gathering coins are deemed to be securities, and the name of the SEC should tell you that securities fall under their jurisdiction. And one of the limitations that the SEC places on securities is that they insist that they can only be traded on regulated, accredited exchanges.

Sadly, many of the coin exchanges that you might find online do not fall into this category. So, if you followed Khaled’s and Mayweather’s advice and bought into one of these coins, you might not have realized that it couldn’t traded as freely as coins like Bitcoin. Right off the bat, their values were severely limited by these restrictions.

On top of that, it appears that the projects that were touted by the two men haven’t yet come to fruition. That means that the only ones who made money out of these deals were the coin issuers and the two celebrities (at least until they had to return the money.)

What this all proves is that investing in cryptocurrencies isn’t so cut and dried as it used to be. That is part of the reason that the market has levelled off after its huge 2017.

But that doesn’t mean that you should shy away completely. It just means that you should take a closer look at the companies that are issuing these coins, in much the same way you would closely inspect the company issuing stock to you.

What to Look for in an ICO

So how do you spot the prospects among the suspects when it comes to Initial Coin Offerings? It really isn’t as difficult as you might think. You just have to take some time, not get easily seduced, and do your homework.

Where to start? Make a checklist including these qualities that every ICO should have.

Good Leadership

Many people invest based on the people in the leadership positions for the companies that are issuing the stocks. You should be thinking along the same lines when it comes to cryptocurrency. There should be a page on the website of the issuers that explains the qualifications of those making the decisions.

Make sure that their success come with companies that you might have heard of before. And it wouldn’t hurt to do some internet searching to make sure that their list of achievements can be verified. Finally, if they’ve experienced proven success with other cryptocurrency-related companies, you should be in good shape.

Strong Ideas

When you’re dealing with a new cryptocurrency coin, you have to realize the competition that it will be facing. The market is glutted with coins, so it’s going to take something strong to make it stand out. That means that you should only consider investing in a project that has a real chance to make some kind of difference in the business world or even in society at large.

As such, you really should take the time to read the white paper. A white paper is a document that can usually be found on the website of the project in question that details what these coins are meant to do and how, technologically, they will do it. Reading a white paper isn’t the most exciting way to spend your time, but a good one should jump out at you and give you concrete reasons why this coin is essential.

Growing Buzz

This can be a tricky realm to navigate. As the example with Mayweather and Khaled shows, it is easy to be misled by hype that isn’t warranted. But there are ways to figure out if a coin that is being issued has a strong buzz behind it.

Check out social media feeds dedicated to cryptocurrency to see if the company is appearing often in mentions from impartial users. Look for newspaper or internet articles detailing the coins and what they’re attempting to accomplish. Basically, you should only consider investing in coins that have some kind of positive momentum gathering behind their ICO.

Red Flags for Cryptocurrency Offerings

Sometimes it’s easier to spot the negatives than the positives. Many ICO’s will put obvious warning signs in front of investors’ faces, but the investors are so worried about missing out on a good thing that they either ignore them or explain them away. That can lead you down a bad road which ends with significant money lost.

What are the telltale signs that will show you that an ICO might not be on the level? Here are three of them:

Wild Monetary Promises

If you stop on the website and see banners advertising how much money you can expect to make from the coin in question, you should quickly give it a pass. You’ll see things talking about how you are guaranteed a certain percentage return on your initial investment. In addition, you’ll also be promised even more from the coins if you invest a certain amount or by a certain date, putting you in preferred “tiers” of investors.

What you’re most likely dealing with when you encounter a site like this is your basic pyramid scheme. This coin will get the issuer rich and no one else. Not even the most blue-chip stock can guarantee investment returns, so you should immediately move on when you start seeing promises like that.

Poor Website Construction

You’d be surprised what people are willing to overlook when the promise of big earnings is in front of them. Many scammers don’t put too much time into constructing the websites that offer their coins. So don’t be surprised to see plagiarized white papers, pictures and bios of leadership that are copied from other sites or simply made up, and bad grammar.

Put it this way: A solid, well-thought-out ICO will be trying to impress investors with substance and not flash. So don’t get hooked into a site that is obviously trying to distract you. Take a close look and make sure that the site looks like some serious time and thought was put into its construction.

Celebrity Endorsements

The examples listed above concerning Khaled and Mayweather were obviously worst-case scenarios in that they were dishonest. But even legitimately-acquired celebrity endorsements should give you pause if you’re looking at a possible cryptocurrency investment. After all, what qualifications does that celebrity have to really know if the coin in question is legit and worth your investment?

Again, endorsements are another example of shortcuts taken by cryptocurrency issuers. They might know that their coin can’t stand up to close scrutiny. As a result, their hope is that the celebrity will distract the investor into getting involved with an inferior product.

Judging Cryptocurrency Gambling Sites

We’ve shown you how easy it is to get confused about cryptocurrency coins in terms of investing in them. Another ever-expanding area that is tied to cryptocurrency is the world of internet gambling. And many of the same warnings and advice applies in this area as well.

If you have ever dealt in cryptocurrency before, you know that the coins possess qualities that make them tailor-made for internet gambling purposes. After all, think of what cryptocurrency coins promise:

  • Privacy: There is no need to reveal all of your personal information to a website just to gamble some money there. Cryptocurrency requires only that you enter some passcode information for the transfer of funds. You can keep your gambling activities to yourself when you use coins instead of traditional funding sources.
  • Monetary Security: Unlike with bank cards or credit cards, cryptocurrency allows you to expose only the money you want in your account. The other methods pull out all of your financial information in those accounts out there even if you only plan to use a small portion of it. Cryptocurrency keeps your money safer in that respect.
  • Quickness: Internet gamblers know how frustrating it can be when their deposit is held up by a credit card company or their withdrawal takes forever to get into their account. Cryptocurrency reduces those wait times dramatically. No delays in deposits means quicker access to your gambling favorites, and instantaneous withdrawals gets you your winnings in no time.
  • Freedom: Whenever you pay for something with cryptocurrency, you eliminate the need for a third party getting involved. It essentially puts the control of your money back in your hands. And it eliminates hefty credit card fees, which also makes you money go farther.

These are all boons for internet gambling with cryptocurrency. But the key is to find a site, or sites, that can take your cryptocurrency wagers but also engenders your trust. Otherwise, you can come upon the same disappointment as those who invest in faulty digital coins.

Finding the Top Cryptocurrency Gambling Sites

The easiest way to discover the gambling websites that can be trusted and offer exposure to cryptocurrencies: Follow our expertise on the subject.

Barring that, if you want to do the research yourself, you should be on the lookout for sites that give you gambling access via cryptocurrency that have specific qualities. If they can check off these boxes, you know you’re on the right track, because these are the criteria that we use when judging the top gambling websites.

Variety of Play

You don’t want to jump in and sign up for a website and find out later that you can’t get odds on the game you want to bet on that night. Or maybe you’re a casino enthusiast and have a slot machine that you favor more than any other. Maybe you like to bet on horse racing or jai alai or something exotic that’s a bit off the beaten path.

You should research the sites in question to see what exactly they do and don’t include among their betting options. The best sites will include all of the top casino entertainment as well as a comprehensive sports book. If you want exposure to all of your betting favorites, it might take accounts on a few different websites.

Incentives

Here is the thing about gambling websites: They want to be involved in the cryptocurrency business as much as you do. So the best ones will make sure to try and lure you with some kind of bonus. This might come in the form of free play or VIP perks or deposit bonuses.

Of course, many of the sites in question will offer these even if you are signing up and plan to fund with traditional methods. But you might find some sites are more aggressive when it comes to giving something back to those who use crypto. Again, a little research will help you discover all this.

Customer Service

You need to have confidence that a betting website is going to resolve any problem that might come up. That’s why established gambling websites, ones that have been in existence for a while and have already proven themselves in this area, are highly recommended. Otherwise, you could be setting yourself up for disappointment.

Especially if you are dealing with cryptocurrency, you might have a lot of questions about how the site handles the process of withdrawing and depositing. There should be contact information on the site and you should be able to reach a representative at any time. Once you get in touch, you should be able to rely on the fact that the site in question will quickly and satisfactorily handle your problems.

Conclusion

What the whole mess with Floyd Mayweather and DJ Khaled should show you is that you can’t be seduced by flash when it comes to dealing in cryptocurrency. That also goes for when you choose a site to gamble with the coins.

Substance should be your goal in picking coins and sites, no matter what a celebrity might tell you to do.
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