The simplest definition of shilling is creating hype around a particular crypto coin with an aim to increase its value. When a person is shilling a coin, he or she is trying to build hype so that people would invest in that particular coin. If the shilling is successful, a lot of people may not only invest but also further promote the coin.
Who Does Shilling?
Sometimes, the prospect of earning a lot of money by promoting something can become so enticing to some people, that they start crossing the line between right and wrong. So they create multiple accounts on websites like 4Chan and Reddit to create hype around a coin. Some will even fabricate false claims and stories about the coin.
Celebrities, social media influencers, and alike, sometimes use their fame to earn large sums by promoting Initial Coin Offering (ICO) issuers. This is usually fine if they are not breaking any laws. However, some financial authorities (i.e. the United States Securities and Exchange Commission – SEC) regard it unlawful to promote ICOs without disclosing payments from them.
Celebrities Shilling Questionable ICOs Under SEC Attack
The SEC has accused certain celebrities and ICO influencers of “unlawfully touting coin offerings”. The first victims to fall involve boxer Floyd Mayweather and music producer DJ Khaled. Mayweather failed to disclose endorsement payments from as many as three ICO issuers: a successful one – Stox, as well as failed Hubii and Centra Tech (CTR).
DJ Khaled also received payments for promoting Centra. The two used their social media accounts to post their positive opinions about said ICOs. “Centra’s…ICO starts in a few hours. Get yours before they sell out, I got mine and as usual, I’m going to win big with this one!”, wrote Mayweather, while Khaled said Centra was an “ultimate winner” and a “game changer”. In November 2018, they both agreed to financial settlements.
Remember John McAfee and the “threats” he received from the SEC for promoting ICOs? He later admitted to getting paid around $100,000 USD per message in such endorsements.
Other questionable celebrity-shilled ICOs include LydianCoin (LDN), a platform that claimed to combine blockchain with AI-driven digital marketing services and whose owner was found guilty of domestic violence. LydianCoin’s ambassador was a television star and hotel heiress Paris Hilton. Actor Steven Seagal became the brand ambassador of Bitcoiin2Gen, the ICO that received a cease and desist order from the state of New Jersey. Seagal hyped the coin several times on his Twitter account.
Another celebrity influencer who has to be careful or he could be accused of shilling as well is the soccer player Lionel Messi who is endorsing a blockchain smartphone by SIRIN Labs. He is outside the SEC’s reach, but that does not mean he is safe from some sort of European SEC equivalent in the future. Musician Imogen Heap is endorsing Mycelia, the project creating an app for musicians to track their publishing, recording, and composition rights.
Other celebrities that have jumped on the crypto bandwagon include Dennis Rodman, Mike Tyson, Ashton Kutcher, Gwyneth Paltrow, Elon Musk, Mark Cuban, Peter Thiel, and Marc Andreessen, more or less successfully.
What SEC Scrutiny Means For Everyone Else
Regulators like the SEC might soon decide to turn their attention to crypto writers, YouTube personas, publications, and cryptocurrency review platforms, anyone receiving payments for endorsing ICOs and not revealing the nature and the amount of these payments to the public. Not even exchanges are safe from the SEC’s probes, as Coinbase experienced firsthand. Specifically, the exchange has only integrated three of the planned five tokens to its listing due to the SEC’s scrutiny and threats of the indictment for listing an unauthorized security token.
In June 2018, Chris Concannon, the Bitcoin Futures president said the SEC would soon go after all ICO market participants and that he expects a large number of class-action lawsuits against teams behind those projects.
All things considered, SEC scrutiny or no, everyone should use caution when it comes to finances in general, especially in such a new field that is crypto. This caution is advised not only when choosing to invest in certain ICOs but also when promoting them. Your own research is crucial in both; you should put a lot of effort into choosing the right ICO to invest in, as you should when choosing the ICO to promote. Be careful not to become the victim of fraud or an uninformed participant in one.
By Sead Fadilpasic