The former SEC chief hinted that influencers adopt various strategies to deceive and mislead their followers into making uncalculated investment decisions.
The US Securities and Exchange Commission (SEC) is increasing its efforts to regulate and enforce compliance among crypto influencers, as former SEC Chief John Reed Stark issues a stern warning about potential prosecutions.
In a Twitter post on Wednesday, Stark, who headed the SEC’s Internet Enforcement unit for 11 years, cautioned those social media personalities in the crypto space who have endorsed dubious projects and engaged in price manipulation in the past, assuring them that their end is near.
According to Stark, the days of social media crypto influencers operating without accountability are coming to an end. He emphasized that the same anti-fraud regulations apply to all forms of price manipulation, whether it involves exchange-listed securities, penny stocks, or crypto assets.
Attention all crypto promoters who use social media to manipulate the price of crypto-securities: Fail not at your peril. Not only will you eventually get caught, but your prosecution will also be like shooting fish in a barrel.
Whether manipulating the price of exchange… pic.twitter.com/AfKROIlR0N
— John Reed Stark (@JohnReedStark) May 30, 2023
Social Media Aid Price Manipulation Schemes
In his tweet, the former SEC chief hinted that influencers adopt various strategies to deceive and mislead their followers into making uncalculated investment decisions.
He further noted that these personalities use social media platforms such as Twitter, Discord, Instagram, and Reddit to perpetrate the scams, leveraging the popularity of the platforms to lure their victims.
Unlike other scams, Stark said that securities fraud could easily be detected and wrongdoers cannot hide their trails from authorities. According to him, law enforcement only needs to power their computers to unearth evidence trails that lead to the crimes.
“Regulators and law enforcement need only turn on their computers to discover an extraordinary and splendid evidentiary trail of compelling and vivid inculpatory evidence. Indeed, far from tying the government’s hands, social media has become the virtual rope that many crypto bros (and sisters) use to hang themselves,” said Stark.
US SEC Crackdowns on Crypto Influencers
Stark cited the case of notorious crypto advocate Francis Sabo, who recently faced charges in a $100 million securities fraud case.
According to the complaint, Sabo, also known as Ricky Bobby, promoted himself as a “trustworthy stock-picking guru”, which helped him gain substantial followers on the Atlas Trading Discord forum, where users are educated about trading and the securities market.
Sabo purchased some stocks and convinced his followers to buy the same tokens. He posted price targets indicating he was buying, holding, or adding to his stock positions to prove that he had the asset.
The SEC had previously indicted other crypto influencers and celebrities violating securities laws. Last year, the regulator fined billionaire celebrity Kim Kardashian $1.26 million for endorsing a fraudulent crypto project called EthereumMax (EMAX). Other celebrities, such as Floyd Mayweather, were involved with the project.
Just recently, Bitboy Crypto, an influencer who has faced public criticism for promoting questionable crypto projects in the past, was named in a $1 billion lawsuit for endorsing unregistered securities.