In a recent case of shilling, US celebrities Kim Kardashian, boxer Floyd Mayweather Jr, and basketball player Paul Pierce, among others, were sued by investors for misleading them into investing in the EthereumMax cryptocurrency. The legal action, per reports, alleges EthereumMax tied up with these celebrities to “misleadingly promote and sell” the cryptocurrency.
In her Instagram story, Kim Kardashian, with 228 million followers, claimed she had a “big announcement for Ethereum max”, which was soon followed by the sharing of a static page to alert viewers that the admin wallet had burned 400 tokens.
Ethereum founder Vitalik Buterin told Bloomberg Kim Kardashian’s post was a “borderline scam” and a “money grab”.
“There is no Mr Bitcoin out there who is paying people to promote bitcoin. There used to be the Ethereum Foundation that was putting out Ethereum, but now there isn’t; there’s just a bunch of Ethereum out there,” said Lisa Braganca, a former SEC branch chief. “And I think that’s where people get confused,” She added.
Cryptocurrencies can be a complex subject for many, and people who invest in these highly volatile assets without proper knowledge remain vulnerable to frauds and scams. Moreover, the absence of credible sources of information on all the developments in the crypto world and limited regulations makes such investors even more susceptible.
‘Shilling’ is one such concept that has affected many unsuspecting investors.
Social media influencers with a wide following, for example, may appear to be legitimate and trustworthy and often influence investors’ opinions. However, while some influencers genuinely aim to educate the masses, some may have a vested interest.
What is shilling?
Shilling is when a person or group of persons promotes a particular cryptocurrency to create excitement for it. It is usually done in collaboration with social media influencers for a quicker and wider reach.
The goal of shilling is to create hype such that it rouses public interest and eventually results in mass buying. The higher the consumer buying, the higher the demand and thus higher the price of the crypto token.
How do you spot crypto Shilling?
Is shilling legal?
Shilling is illegal in traditional financial markets. However, with no tight regulations for cryptocurrencies yet, it is unclear what kind of promotion qualifies as legal or illegal. Laws that deal with cryptocurrency are still in muddy waters, and the specifics aren’t out there yet. It is also possible that multiple laws could govern the regulation of cryptocurrency, which is why it is so easy to falter when it comes to crypto investing.
Danielle Dudai, a crypto attorney, told Business Insider that it is very likely that securities laws will probably apply to cryptocurrencies as well. It is because they shall be treated as securities until proven otherwise.
(Edited by : Yashi Gupta)
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