Business is booming.

Inside the ‘Wild West’ of cryptocurrencies and social media influencers

0 21

In early June, when Brayden LeBlanc saw four influencers from the popular esports team FaZe Clan promote a cryptocurrency project, he thought he was about to make a safe and worthwhile investment. 

The project, a charity cryptocurrency token called Save the Kids, launched on June 5, and its creators promoted it as a way to make the world a better place. The members of FaZe Clan, who each have millions of social media followers, gave it the feeling of something new and exciting. LeBlanc, 21, from Saint John in New Brunswick, Canada, initially invested $94.

But hours after the cryptocurrency token’s launch, its value crashed. LeBlanc’s investment is now worth around $5.

“I feel like I’ve been played,” LeBlanc said. “These FaZe members are people that myself and millions of others look up to. We want to be like them.”

While the FaZe Clan members who promoted the token have since been removed or suspended by the team for their involvement, the episode has become one of the most high-profile examples of what industry watchers and an emerging group of online watchdogs say is a problematic dynamic in which influencers promote cryptocurrencies — with young people particularly susceptible to the hype.

The cryptocurrency boom of 2020 and early 2021 attracted a new wave of mainstream investor interest, particularly from younger people like LeBlanc, as more established cryptocurrencies like bitcoin and ethereum, along with alternative coins like dogecoin, skyrocketed in value.

That helped inspire a wave of new cryptocurrencies to enter the market, some of which turned to celebrities and internet influencers to become ambassadors and help gain traction. Kim Kardashian, Floyd Mayweather and Logan Paul are just a few of the personalities to have promoted altcoins — a catchall term for cryptocurrencies other than bitcoin.

But some have gone wrong. LeBlanc alleged the Save the Kids token was a pump and dump — a well-known scheme to boost the price of an asset. At least one of the FaZe Clan members has said he also lost money and believes a “con man” who abused the influencers’ trust is to blame.

“It just feels like me and the other investors were used as a way to get easy money,” LeBlanc said.

In the past year, the number of cryptocurrencies have doubled to 10,000 according to the tracking website CoinMarketCap. And while it appears the market is booming, more than $80 million has been lost in crypto-related scams since October 2020, according to a report this year by the Federal Trade Commission.

“With bitcoin’s value soaring in recent months, new investors may be eager to get in on the action,” said Emma Fletcher, an analyst with the FTC. “All of this plays right into the hands of scammers.”

The report found that people aged 20 to 49 were five times more likely to lose money in cryptocurrency investment scams than older age groups. The United Kingdom’s Financial Conduct Authority also revealed in a report this year that new and younger audiences were engaging in high-risk investments like crypto and were often driven by emotions and feelings. 

It found that the reasons for investing were often based on competition and novelty, rather than “conventional, more functional reasons” such as saving for retirement.

New cryptocurrency technology has created opportunities for scams to take place, according to Rachel Siegel, who provides crypto-related educational content to more than 150,000 followers on Twitter.

“The Save the Kids scam was very similar to a lot of other scams we see in the crypto space,” Siegel alleged. “I think that there is a lot of good ways this technology can be utilized. It just hasn’t been around long enough to clearly decipher legitimate projects from disingenuous ones.”

The FTC declined to comment on whether it was investigating the Save the Kids matter.

The allure of overnight wealth generated by cryptocurrencies combined with the sway of widely followed social media stars is seen by some in the cryptocurrency industry as a recipe for disaster. Lucas Dimos, 20, is one of a group of social media influencers trying to counter this problem. On his TikTok account, he tries to offer a reality check to his almost 300,000 followers on the exuberance of the crypto market and warn people away from expecting overnight success.

“People just go beyond the pale and gamble way more than they should have,” he said, adding that a number of people have contacted him claiming they had lost half their college tuition investing in crypto.

“These people are not investors, they’re gambling addicts. We need to stop treating it like a casino,” Dimos said. “Do your own research, invest in good, fundamentally sound projects and never invest more than you can afford to lose. … Those three things are everything I keep hammering home in people’s heads because it can get really exciting really quickly.”

He also said there’s little stopping influencers from profiting off their clout with little oversight.

“We’re in the Wild West right now,” he said. “The sheriff is not in town. Nobody’s going to come knocking at your door.”

Other social media personalities have gone further, forming something of an informal watchdog subculture to try to identify scams and warn people about them. One YouTube creator who goes by Coffeezilla (his real name is Stephen but he withholds his last name online due to the video content he creates) made a video on June 24 highlighting alleged issues with the Save the Kids cryptocurrency. He alleged the token’s developers had…

Read More: Inside the ‘Wild West’ of cryptocurrencies and social media influencers

2021-07-21 16:05:37

Notify of
Inline Feedbacks
View all comments
Watch Sky News