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Source: AiYing Compliance
The future development of cryptocurrency and NFT markets has attracted widespread attention as Trump may be re-elected as U.S. president.During Trump’s first term, he was impressed by the liberalization of financial markets and the policy of support for businesses.And this time, his return may bring new changes and challenges to the cryptocurrency market.For details, please read Aiying’s article yesterday ““Gunshots sound, turning point begins” Trump’s love-hate review of cryptocurrencies, US cryptocurrency regulatory policies may be accelerated》.
In recent days, with the release of news of Trump’s election, the cryptocurrency market has experienced a round of rise, with the prices of Bitcoin and other major cryptocurrencies rising one after another, reflecting the market’s expectations and reactions to future policy changes.This article will explore the compliance issues of Trump-related cryptocurrency projects, and the case analysis of KOLs and celebrities promoting cryptocurrency projects.
According to information collected by Aiying, the SEC has been cracking down on such undisclosed celebrity promotion activities in recent years. KOLs can quickly spread information through social media to help projects attract more investment.In March, Monad Labs completed a huge round of financing with a valuation of up to $3 billion. Venture capital firms like Paradigm participated. Some KOLs can invest at a price of one-fifth lower than this valuation. These KOLsInvestors can sell in a few months instead of waiting for years like equity investments. This is how financing monetization looks very attractive, but it has also attracted the attention of the SEC.
Kol mainly involves several regulatory itching points in promoting encryption projects:
1. The SEC’s provisions are mainly concentrated in the Securities Act and the Investment Advisor Act, which require celebrities or influencers who promote securities to disclose any form of compensation to ensure investors can obtain transparent information.These regulations are intended to prevent misleading publicity and potential fraud.
These remunerations may include, but are not limited to, the following forms:
1. Cash payment
This is the most direct form of remuneration, which refers to the cash rewards received directly by influencers.
2. Tokens or cryptocurrencies
Influencers may receive compensation in the form of tokens or other cryptocurrencies.These tokens can be crypto assets issued by the project party or other forms of digital currencies.
3. Equity
Influencers may receive equity in a company or project as compensation.This form of compensation is common in early financing of startups and blockchain projects.
4. Other forms of financial compensation
In addition to direct cash or tokens, compensation can also include any form of financial benefit.For example, free products or services, future earnings sharing, or other forms of economic compensation.
5. Contracts and Agreements
The remuneration stipulated in any form of written contract or agreement, whether it is a one-time payment, regular payment, performance bonus, etc., falls within the scope of disclosure.
This clause requires that anyone promoting securities in public, whether directly or indirectly, must disclose this fact.The purpose is to protect investors and ensure market transparency and impartiality.
But what Aiying wants to say is:In the absence of compensation, If influencers do not accept any form of compensation, simply invest and promote it out of personal interests or beliefs, they generally do not need to specifically disclose their financial relationship with the project.At this point, their promotional behavior is more regarded as personal opinions or recommendations.(This is also the reason why Trump and Musk have not been targeted yet, as will be mentioned later).
2. Market manipulation
1.According to the Securities Law and the Commodity Trading Law, market manipulation is illegal
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Securities Law: If a cryptocurrency is recognized as a securities, the SEC will have regulatory authority.In the event that it is not recognized as a securities, it may be difficult for the SEC to take direct action on market manipulation.
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Commodity Law: Even if it is not recognized as a securities, cryptocurrencies may still be considered commodities, and the CFTC can investigate market manipulation under the Commodity Exchange Act.
2.Whether it constitutes market manipulation needs to be considered:
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intention: If Musk and Trump’s actions are believed to be intentional influencing prices through misleading information or market manipulation and profiting from them, then it may constitute market manipulation.
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Actual income: If it can be proved that Musk and Trump have gained economic benefits through these actions, regulators may investigate further.
Trump and other KOLs are involved in related encryption projects directly or indirectly
1. Trump-related projects
1. TrumpCoin situation
This cryptocurrency was created to support Trump and his agenda, but was not officially recognized by Trump himself or his team.TrumpCoin was launched in 2016 to support Trump’s policies and initiatives.The Trump family even publicly stated that they had nothing to do with TrumpCoin and threatened legal action.
2. The issuance and promotion of Trump’s NFT
Trump has indeed participated in the issuance and promotion of NFT (non-fungible tokens).Here are a few key points:
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Trump Digital Transaction Card(Trump Digital Trading Cards): Since December 2022, Trump has released a number of NFT series that have used his name and image, including a “Mugshot Edition” that sold out shortly after its first release.
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Earnings and financial disclosures: According to financial disclosure documents from the U.S. Government Ethics Office, Trump has made considerable gains from these NFT sales—from $100,000 to $1 million through the NFT program launched by CIC Digital.This is done in line with the requirements of the Securities Law and the Investment Advisors Law and is exempt from SEC review.
2. Other KOLs are judged:
In recent years, the SEC (SEC) has carried out several enforcement actions against celebrities who have not disclosed paid promotions of cryptocurrencies, and there have been multiple jurisprudences and settlement cases.The following are some specific cases compiled by Aiying:
1. Kim Kardashian
Kim Kardashian is promoting EthereumMax (EMAX) tokensNot disclosedThe compensation collected by himself was charged by the SEC for violating Article 17(b) of the Securities Act.She agreed to pay a $1.26 million fine and compensation and promised not to promote any crypto-asset securities for the next three years.
2. Floyd Mayweather and DJ Khaled
In 2018, Floyd Mayweather and DJ KhaledNot disclosedThey were charged by the SEC for the rewards they received for promoting the initial token offering (ICO).Mayweather was fined more than $600,000, while DJ Khaled was fined more than $150,000.
3. Paul Pierce
Former NBA player Paul Pierce is promoting EMAX tokens on TwitterNot disclosedRemuneration, charged by the SEC.He was fined $1.4 million and agreed not to promote any crypto-asset securities for the next three years.
4. Justin Sun and Eight Celebrities
In 2023, the SEC filed a lawsuit against Tron founder Justin Sun and his company, as well as eight celebrities including Lindsay Lohan, Jake Paul, Soulja Boy, and Akon, accusing them ofNot disclosedRewards received when promoting Tronix (TRX) and BitTorrent (BTT) tokens.Most of these celebrities agreed to pay a fine totaling more than $400,000 to settle the charges.
Aiying comments:The SEC has taken strict enforcement measures against celebrities who have not disclosed paid promotions of cryptocurrencies.Celebrities and influencers must disclose their reward relationships when promoting cryptocurrencies to avoid legal risks.
