Although the entire market has been in a bear market for the past year, it has also brought opportunities for precipitation and development of various ecosystems. During this year, the construction around Web3.0 has never stopped, and the infrastructure of various ecosystems is also constantly iterating.

The Web 3.0 space has come under increasing regulation in recent months. The U.S. Securities Exchange Commission (SEC) uses the Howey test to determine whether a project needs to comply with legal standards for securities. The main criteria for judging are:

• Is there capital investment involved?

• Is there an ordinary business behind the project?

• Is there an expectation of profit?

• Did it come from the efforts of others?

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Many stars are under supervision

This is why SEC Chairman Gary Gensler announced on October 3, 2022 that Kim Kardashian was charged with $250,000 for promoting the EthereumMax project without disclosing it.

Kim Kardashian will then pay a fine of $1.26 million to the US Securities and Exchange Commission.

It's not just Kardashian, the top Internet celebrity, who has encountered such "trouble". NBA star Paul Pierce (Paul Pierce) and boxer Floyd Mayweather (Floyd Mayweather) have also been included in the lawsuit list.

In addition, there are many other cases of celebrity endorsement projects in the field of Web3.0, including the famous football player Rob Gronkowski (Rob Gronkowski) for the promotion of Beyond Protocol, and the former child star Lindsay Lohan ( Lindsay Lohan said on Twitter that she was exploring the DeFi field and liked certain projects.

Not just endorsements, some stars are even founding members of the project team. For example, YouTube celebrity Logan Paul (Logan Paul) once endorsed a project called Dink Doink, but he never disclosed that he was a key member of the project.

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Celebrities face class action lawsuit over endorsement program

In addition, there are several ongoing class action lawsuits against endorsements in the Web3.0 field, most of which are based on the fact that the endorsers did not disclose their relationship with the project. The most famous of these are Tesla CEO Elon Musk’s endorsement of Dogecoin, and NBA celebrity Mark Cuban’s promotion of Voyager products.

In January 2022, a class-action lawsuit was filed for promoting a questionable project on social media platforms by other celebrities, including Kim Kardashian and Floyd Mayweather. Plaintiffs and other investors who purchased EthereumMax between May 14 and June 17, 2021, suffered financial losses due to celebrity endorsements, the suit alleges.

Ethereum Max has plummeted 97% since early June, with some investors arguing that the project is trying to boost the price of the asset through false or misleading claims. The litigants accuse Kardashian and Mayweather of “selling” Ethereum Max.

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NFT spokesperson

Before the market crashes in early 2022, it seems like every few days a celebrity is promoting an NFT or Metaverse project. Countless celebrities, athletes, artists, and even sports teams have advertised their partnerships with projects on their social media platforms, a practice that has drawn regulatory scrutiny over the legality of such activity.

"Shilling" is a commonly used term in the field of Web3.0 and NFT, that is, to market a project in a secret way to increase the value of its tokens. Marketing itself is not illegal, but if the fact that the promoter is paid is not disclosed, then there will be a conflict of interest.

That’s why the Federal Trade Commission (FTC) mandates that influencers must disclose any substantial connection to the brand they’re endorsing and disclose that information clearly, explicitly, and conspicuously in their endorsement. In addition, endorsements must mention the risks associated with the investment, the financial losses that may result, and the personal benefits that the promoter may obtain through the promotion.

According to the U.S. Securities and Exchange Commission, celebrities and influencers who use social media to encourage fans and others to buy stocks or other investments will be found illegal if they fail to disclose direct or indirect payments, sources and amounts.

When celebrities buy NFTs and then post about them on their social media platforms, the value of the NFTs themselves can change due to their public exposure. When investors rely on celebrity efforts to promote a project and increase its price, it satisfies the fourth item of the Howey test.

TINA.org (Truth IN Advertising) is one of the few watchdog groups warning celebrities. The organization has proactively warned 17 celebrities who promoted NFTs: DJ Khalid, Drake Bell, Eminem, Eva Longoria, Floyd Mayweather, Gwyneth Paltrow, Jimmy Fallon, Logan Paul, Madonna, Meek Mir, Neymar Junior, Paris Hilton, Shaquille O'Neal, Snoopy Dow Greg (Snoop Dogg), Timbaland, Tom Brady and Von Miller.

TINA.org also sent letters to the legal teams of Justin Bieber and Reese Witherspoon, informing them of their respective deceptive promotions on their social media accounts inBetweeners and World of Women NFT projects without disclosing their substantive ties to these companies.

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Celebrities, actors, and singers are all caught up in it

Taking a closer look at the celebrities who have been warned by the FTC, four have already "stand out" from the list for their numerous projects: socialite Paris Hilton, actor Drake Bell, rapper History Nub Dogg and "Desperate Housewives" Eva Longoria.

At present, Paris Hilton has participated in more than 15 independent NFT projects. According to Twitter account information, she stepped into the NFT field for the first time in 2021, released her first NFT, and auctioned it on Origin Protocol.

Since March 2021, she has continued to develop and continuously promote many other NFT projects. Hilton is further active in this arena by participating in interviews, podcasts and conferences, which help her further expand her brand. Notable projects Paris Hilton has worked on include: You by BFF, Super Plastic, Origin Protocol, Particle Collection, 1,989 Sisters, Friends With You, Bored Ape Yacht Club, E4C: Rangers by Ambrus Studio, JPierce, Goldweard, Blake Kathryn & Paris Hilton, ThankYouX, TECHNOFISH, Nifty Gateway, Spacedrip by RTFKT, EY3K0N.

Hilton's media company revealed that she has earned more than $3.5 million from NFTs so far in 2022 alone. Additionally, she currently holds roughly $568,000 worth of assets in NFTs and ERC-20s, based on CertiK’s analysis of her publicly visible wallets.

Similar to Paris Hilton, Drake Bell first started dabbling in NFTs in early 2021, except that instead of auctioning charity NFTs, he announced his NFT purchases and promoted various collections immediately after the start. Starting March 2021, Drake Bell has so far endorsed more than 20 projects on his Twitter account: Bored Ape Yacht Club, AstroHedz, CryptoPunks, Desperate ApeWives, Happy Hippos, Numb Bunny, Crypto Reapers, Cool Cats, BearXLabs, Sol Team Six, Chibis By NFG Guild, Ape Trader NFT, OnePunchFloki, Hooded Thieves, Cheems Inu, GZLR on InuYasha, Mouse Gang, Atopia Apes, Metamonz.

The famous American rapper Snoop Doog (Snoop Doog) also has a deep background in NFT. In April 2021, he released A Journey with the Dogg on the Crypto.com NFT platform, which is his first NFT project. Since then, Snoopy has frequently collaborated with and endorsed NFT projects. Projects Snoopy has tweeted about include: Food Fighters Universe, Orange Comet, Solana/Babolex, Astrals, The Sandbox Game, Go Gala Music.

Likewise, it’s unclear how much money Snoopy made from his tweets about his affiliated NFT project. But according to his personal wallet information, the value of his NFT portfolio is about $4.3 million.

Eva Longoria has been involved in NFT since the beginning of this year, and purchased her first NFT from the World of Women project in January 2022. Since then, she has become an active participant in NFT Space, often tweeting her support for the projects she invests in. Longoria primarily invests in female-led NFT projects. She later promoted a variety of projects through podcasts, interviews, and philanthropic partnerships: World of Women, Boss Beauties, FlowerGirls, 1,989 Sisters, Women Tribe, Robotos, Long Neckie Ladies, Autograph.

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list analysis

CertiK professional analysts have compiled a list that includes celebrities who have been warned by the FTC or otherwise engaged in "promotion." Please enter "celebrity list" in the background for more information.

So which projects are widely recognized? Among all these celebrities, the most common endorsement program is Bored Ape Yacht Club (BAYC), which has been promoted by nine celebrities, including: Paris Hilton, Drake Bell, Eminem, Gwyneth Paltrow, Jimmy Fallon, Logan Paul, Neymar Junior, Timbaland and Von Miller.

Additional analysis revealed that Drake Bell had the most endorsement scam projects of any celebrity. With the market downturn starting in early 2022, NFT projects endorsed by celebrities have also declined sharply.

It should be noted that the above is not a complete data about the properties owned by stars. Because the data is based on on-chain data statistics, and stars are likely to have other non-public wallets.

write at the end

write at the end

In short, celebrity endorsement will exaggerate the value of NFT by virtue of its own influence, but this is a kind of market manipulation that is currently unrestricted and unregulated. The SEC and FTC have provided some guidelines, but there are still gray areas.

While several class action lawsuits are underway, there are no firm details on legal penalties for promoting NFTs or other assets in the Web 3.0 space. It is also fortunate that groups like TINA.org exist, albeit without substantial legal ramifications.

At the same time, the US Securities and Exchange Commission also warned investors that celebrity-backed ICOs and influential people may lack expertise in NFT technology, so doing your own research and due diligence is essential to avoid scam projects.

It is not wise to take financial advice directly from celebrities, especially those who have no expertise in the industry and are only paid to promote certain projects.