Blaming celebrities distracts from crypto crisis of confidence

Kim Kardashian, Lindsay Lohan and Cristiano Ronaldo are among celebrities to become involved with promoting trading in controversial crypto products, which are now seeing increasing regulatory attention.

Global football icon Cristiano Ronaldo, arguably the most famous figure in today’s ‘beautiful game’, is facing a class action lawsuit in the US over his promotion of Binance, currently the world’s largest cryptocurrency exchange.

The plaintiffs, named Mikey Vongdara, Michael Sizemore and Gordon Lewis, are claiming they incurred significant losses following Ronaldo’s promotion of the business.

In a November 27 filing in a US District Court in Florida, they claim the five-time Ballon d’Or winner “promoted, assisted in, and/or actively participated in the offer and sale of unregistered securities in coordination with Binance”.

In the summer of 2022, Binance signed a multi-year deal with the player to promote a series of non-fungible tokens (NFTs), including three of his digital collectibles.

The lawsuit claims Ronaldo’s 2022 promotion of Binance contributed to enhancing the exchange’s global popularity, alleging Binance-related searches skyrocketed 500 per cent following Ronaldo’s promotion of the NFTs.

In addition, according to the plaintiffs, people who used the exchange to buy Ronaldo’s NFTs were more likely to be already using the platform and that clients may have invested in tokens deemed unregistered securities by the Securities and Exchange Commission (SEC), the US financial regulator.

Ronaldo is not the first celebrity to be involved in crypto promotion.

Reality TV superstar and businesswoman Kim Kardashian last year was hit with a fine of $1.3m from the SEC for promoting security tokens sold by EthereumMax, without disclosing she was paid $250,000 for this.

Actress Lindsay Lohan tweeted to her more than 8m followers that she was “exploring” decentralised finance and she was “already liking” Tronix (TRX) tokens, a crypto product whose founder has since been charged with fraud.

Tom Brady, a retired NFL quarterback, has been an “ambassador” for FTX, the now collapsed empire of Sam Bankman-Fried, and had appeared at the company's conference in the Bahamas and in TV commercials that promoted the exchange as “the most trusted” institution.

Of course, my sincere sympathies go to those investors who have suffered. But while they seek restitution for the losses, it is crucial to recognise that blaming Ronaldo and other celebrities oversimplifies a complex issue.

Evolving crypto ecosystem

Instead, attention should also be directed towards global regulators, who have been slow to establish clear guidelines for this evolving financial landscape.

The crypto ecosystem has experienced exponential growth in recent years, gaining popularity not only among tech enthusiasts, but also attracting the attention of mainstream investors.

As the sector expands and is increasingly absorbed into the mainstream financial system, the role of global regulators becomes paramount in ensuring investor protection and market integrity.

The cryptocurrency market operates in a decentralised and often cross-border manner, presenting unique challenges for regulators.

However, the absence of a unified and clear regulatory framework has created a supervision void that allows both legitimate and questionable activities to persist. 

Financial regulators around the world have been dragging their feet on the crypto issue, despite the burgeoning market. Bitcoin alone has a market cap of around $750bn.

In traditional markets, celebrities often endorse various investment platforms without facing legal repercussions, as long as they adhere to existing regulations. The crypto market should be no exception, and the responsibility for setting clear guidelines lies with regulatory bodies.

The lawsuit against Ronaldo underscores the urgency for global regulators to establish a clear and comprehensive regulatory framework for the cryptocurrency market. A well-defined regulatory landscape would not only protect investors but also promote the legitimate growth of this innovative financial sector.

These developments are further bad news for beleaguered Binance. Former CEO, the charismatic and hugely influential Changpeng Zhao, better known as CZ, recently stepped down as he believed “it is the right thing to do”.

Richard Teng, previously global head of regional markets at the exchange, has been named as Zhao’s successor. It comes after CZ pleaded guilty to criminal charges for anti-money laundering and US sanctions violations, including allowing transactions with Hamas and other terrorist groups.

CZ was until this point the most powerful person in crypto. As such, this scandal triggered some short-term volatility in the market as investors digested the news.

Seeking SEC approval

However, the crypto market will thrive as institutional money is pouring in and we expect it to continue to do so. BlackRock, the $9tn asset manager, alongside WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise and Valkyrie Digital Assets, have published bitcoin ETF applications waiting to be approved by the SEC.

We believe that bitcoin ETFS are an imminent inevitability, and this would help drive crypto prices and mass adoption among private clients.

Should SEC approval happen, it would be a landmark moment for bitcoin. The acceptance by the financial regulator of the world’s largest economy of this spot ETF would show that bitcoin is, without any question, part of the global mainstream financial system.

For now, it appears that law enforcement and regulatory authorities worldwide are cracking down on digital currency executives and companies. Greater regulatory scrutiny must be championed as digital currencies are set to play an ever-greater role. Cryptocurrencies must come into the regulatory tent and be held to the same standards as the rest of the financial system.

They are here to stay – and the market is only set to grow. There can be no doubt that regulation of the crypto ecosystem is required and, I believe, it should be a priority.

Blaming celebrities for their involvement in the market distracts from the core issue.

Nigel Green is CEO and founder of deVere Group