What are celebrity-backed cryptocurrencies?
In the last couple of years, I’ve noticed a wave of celebrity-backed cryptocurrencies explode across the internet. At first, they looked like bad investments, with slick branding, famous faces like Logan Paul or the 6-7 kid, promising the next big thing. But upon closer evaluation, these tokens weren’t a new innovative financial tool for creators, but rather an unregulated scam on the blockchain, using celebrities to take advantage of public trust.
What’s the purpose?
At its core, the primary purpose is to profit from perceived hype over a celebrity. Scam developers knew that if they could start getting well-known celebrities to endorse something as unregulated and off the grid as cryptocurrencies. There could be little to nothing done in repercussions. Allowing the scammers to more safely inflate and sell their own shares. A classic pump and dump.
This scam works by:
- Creating a token with a catchy enough name or celebrity backing it
- Either paying the celebrity in shares or in a percentage of revenue
- Market it heavily online to people who do not know better
- Drive as much scarcity and FOMO as possible to the celebrity’s audience
- Price of coin as well as demand spike, inflating its price
- The creators silently sell off the majority of holdings, causing prices to crash instantly
- Celebrity usually plays dumb or isn’t held responsible, regardless
How to detect possible crypto scams:
Primarily by doing more research into your investments, as well as specific cryptocurrencies, if someone wants to specifically buy them. By doing research into not only what the crypto you’re investing in is worth, or what it means. Additionally, finding out who is behind the selling of the crypto or investment can also give you good indicators into the cryptocurrency’s validity.
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