Crypto Decrypted

10Guarding Against Fraud

Surely it is a sign of the times when Kim Kardashian pumps an investment opportunity for EthereumMax to her hundreds of millions of followers on Instagram. Guess who came knocking? The SEC, of course. EthereumMax was built on the Ethereum blockchain but was otherwise unrelated to Ethereum. Because promoters were noting that buyers of the tokens could expect “reasonable returns,” it was deemed a security, per SEC guidelines. SEC guidelines also include an anti‐touting law, which says you can't promote a security (or anything that looks or smells or acts like a security) without disclosing that you were paid to do so. Ultimately, this resulted in a $1.26 million settlement with the celebrity for not disclosing the $250,000 she had received to promote the crypto token. Kardashian's paid boosting isn't quite a scam, but her reputation and cachet allowed her to drive followers to a product that, shall we say, didn't meet up to our standards. Importantly, this demonstrates the creeping spread of mass misinformation about crypto assets, and how easy it is to get drawn into something that seems credible but simply may not be.

While the actual criminal use of crypto is minimal, we’d be remiss if we didn’t directly address the fact that there are plenty of scams out there designed to take advantage of you, the investor. These could be bogus protocols, illicit wallet addresses, suspect endorsements or even full websites that look just like legitimate blockchain ...