Celebrity-Backed ICOs Linked to Scam Rates Up to 40 Points Higher
Celebrity endorsements helped initial coin offerings raise capital but were tied to weaker outcomes, especially when promoters lacked relevant expertise.
Celebrity-backed initial coin offerings were associated with sharply higher scam rates, with the difference reaching 39–40 percentage points through April 2023 and rising most when promoters lacked relevant expertise.
The association was 23–26 percentage points through September 2019 before widening in the later period. The findings indicate that celebrity visibility helped projects attract capital but did not reliably signal stronger outcomes.
The relationship was particularly pronounced when a celebrity’s expertise did not match the token’s purpose. The results add quantitative support to long-standing investor-protection warnings about paid promotion in crypto markets.
Paid celebrity promotions of token securities must disclose the nature, source and amount of compensation. Kim Kardashian received $250,000 for an undisclosed paid promotion of EMAX tokens and agreed to pay $1.26 million to settle charges on Oct. 3, 2022.
SEC Chair Gary Gensler said, “It doesn’t mean that those investment products are right for all investors.” SEC Enforcement Director Gurbir S. Grewal said, “Investors are entitled to know whether the publicity of a security is unbiased.”
The findings describe an association between celebrity endorsements and scam classifications, not proof that every promoted token is fraudulent. They also distinguish fundraising success from evidence of a project’s quality or credibility.
