Celebrity-Backed Cryptocurrencies Are More Likely To Be Scams, Says Research

Asher Tame
Asher Tame Crypto
3 Min Read

New research shows that there is a link between celebrity support for a crypto project and the likelihood of it being a hoax.

The research titled “The Effect of Celebrity Support in the Crypto Industry” conducted by two former SEC economists – Joshua T. White and Sean Wilkoff – investigated the effects of celebrities boosting various CIOs.

They found that “celebrity-backed ICOs are associated with a 23 to 26 percent increase in fraud by September 2019 and a 39 to 40 percent increase in fraudulent ICOs by April 2023.”

celebrity backed cryptocurrencies are more likely to be scams says research 2

This “Suggestive Evidence” Points To A “Red Flag For Investors,” The Researchers Wrote.

The research examined the behavior of 21 celebrities from 2016 to 2018, including Floyd Mayweather, Snoop Dogg, Paris Hilton, and Lionel Messi.

“We assumed that celebrities could increase the visibility of cryptocurrency given their social media reach and lead to a fear of missing out (FOMO),” Joshua T. White told Decrypt via email. “Given the newness of blockchain technology and cryptocurrencies, we weren’t sure if celebrities would have the experience to identify real, credible projects [or] if their management team took the time to understand the legal risks of publicizing a particular cryptocurrency without disclosing that it is being sponsored.”

Another important finding was that such celebrity endorsements are more likely to be a hoax when the celebrity’s profession does not match the ICO’s product, according to the researchers’ sample.

However, when a celebrity’s profession matches the ICO’s product – such as a soccer player endorsing an ICO that will fund a blockchain-based sports betting site – it is less likely to be a hoax

“It shows that when celebrities understand the use case for the token, they seem to be more diligent or have a better understanding of the product they are endorsing,” White told Decrypt. “An analogy would be a soccer player advertising cleats versus a soccer player advertising shampoo (any irony with Messi and Cristiano Ronaldo, should not be mere coincidence). They probably have a better understanding of the soccer cleats they are advertising than the chemicals in the shampoo.”

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Asher Tame
By Asher Tame Editor-in-chief
Hi there! My name is Asher, and I'm a Finance Editor based in Canada. I'm passionate about all things finance and have spent years honing my skills in the industry. I graduated from the Master of Finance program at the University of Toronto, which provided me with a strong foundation in financial theory and practice. Since then, I've worked in a variety of finance-related roles, including as a financial analyst and a financial advisor. These experiences have given me a deep understanding of the industry and a keen eye for detail. As a Finance Editor, I'm responsible for overseeing the financial content produced by my team of writers. I work closely with them to ensure that our articles are accurate, insightful, and relevant to our readers. I'm committed to providing our readers with the information they need to make informed decisions about their finances.
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