Advertisement misconduct is becoming more prevalent in crypto, taking advantage of naive investors. In a statement shared by Bloomberg, FTC confirmed its stance on curbing the practice within the industry.
The Federal Trade Commission (FTC) is an independent agency of the United States government whose role is to enforce civil antitrust law and promote consumer protection.
FTC’s role in protecting the crypto community
The FTC confirmed that crypto firms were using false, misleading adverts.
We are investigating several firms for possible misconduct concerning digital assets.Juliana Gruenwald Henderson, FTC spokeswoman.
The agency also promotes public education. When FTX crumbled, FTC shared that users should abstain from paying to get assistance in recovering funds from failed exchanges. At the time, FTX employees were allegedly taking bribes to help with withdrawals.
The agency is strict on adverts and ensures that individuals disclose sponsored reviews and endorsements to avoid misleading the public.
The agency has taken its seat next to the Securities and Exchanges Commission (SEC) in regulating the crypto industry.
Advertisement misconduct in the crypto industry
Earlier in October, the SEC announced charges against the celebrity Kim Kardashian for touting the infamous EthereumMax cryptocurrency without proper disclosure.
Other celebrities who promoted the project included Floyd Mayweather and Paul Pierce. The celebrater later agreed to pay $1.26 million to have the case closed. The project was a scam and resulted in the loss of investor funds.
More recently, an investor (Edwin Garrison) filed a complaint against Sam Bankman-Fried for falsely advertising FTX. The complainant cited celebrity endorsers like Shaquille O’Neal, Tom Brady, and Stephen Curry, who were involved in the promotion.
The exchange, then the third largest by trading volume, collapsed, resulting in the loss of millions of investor funds.
Crypto exchanges have been proactive in building brand awareness by funding high-profile advertisements to restore public confidence. Crypto.com goes without saying the exchange has had high visibility in the FIFA world cup games. Little, however, is told about its native token CRO, which is down 88% from its year’s opening price of $0.59.
The Advertising Standards Authority (ASA) of the United Kingdom has also raised concerns about ad misconduct in the industry. The agency has previously clumped on multiple crypto companies on false adverts.
The ASA outlines that advertisers should be clear about their products. They should provide the regulation status of the advertised cryptocurrency, clarify its future price movement with factual data and be transparent to avoid misleading investors.
The clampdown has not spared corporate clients.
In April, the Arsenal football club fell into trouble with the ASA for crypto adverts that misled the public on its website and Facebook page. ASA commented that the featured products were not regulated in the UK and carried heavy tax implications. The courts later ruled that the club should take down the adverts.
In August, Truth In Advertising (TINA) organization sent letters to celebrities endorsing NFTs probing the motivation behind their acts. The celebrities included Gwyneth Paltrow, Eva Longoria, Floyd Mayweather, Tom Brady, DJ Khaled, and Paris Hilton.
“It is an area rife with deception including, but not limited to, a failure to clearly and conspicuously disclose the promoter’s material connection to the endorsed NFT company,” reported TINA.
The number of false crypto advertisements masquerading on social platforms is n the rise. The advertisements are alluring and prey on naive investors. The responsibility to avoid falling prey to these advertisements ultimately falls to the target audience, the general public.
The public should always conduct due diligence before engaging with these advertisements.