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Crypto influencers leveraging fake followers, views, and ‘likes’ to inflate their social media presence may soon face hefty fines from the United States Federal Trade Commission (FTC).
On August 14, 2024, the FTC announced that its commissioners unanimously approved new federal regulations aimed at curbing fake reviews and deceptive social metrics. These rules will take effect 60 days after their publication in the Federal Register, potentially as early as October.
The new regulations specifically prohibit the sale or purchase of fake indicators of social media influence, including artificially generated followers and views created by bots or hijacked accounts.
The rules target individuals and entities who know or should have known that the social metrics were fake, especially when used to misrepresent influence for commercial gain.
FTC’s Crackdown Includes Fake Reviews
The FTC has also expanded its crackdown to include fake reviews generated by artificial intelligence or those provided by individuals without actual experience with the product or service.
Moreover, the new rules address deceptive practices related to celebrity endorsements, insider reviews, and the suppression of customer feedback on review websites. Violators could face fines of up to $50,000 per infraction.
U.S.-based advertising attorney Rob Freund highlighted the broad scope of the rules, noting that anyone using inauthentic methods to boost metrics like views, likes, or subscribers will be in violation. Buying (and selling) followers is a no-no.
"Fake" here means any indicators of influence that "do not reflect a real individual's or entity's activities, opinions, findings, or experiences."
So, everyone juicing their views, saves, plays, subs, likes, etc. through any inauthentic means violates the new rule.
— Rob Freund (@RobertFreundLaw) August 14, 2024
“Fake reviews not only waste people’s time and money but also pollute the marketplace and divert business away from honest competitors,” FTC Chair Lina Khan said in a statement. “The final rule will protect Americans from getting cheated.”
Influencers Promote Crypto Scams
A disturbing trend in the rapidly evolving world of cryptocurrency is influencers leveraging their massive followings to promote dubious crypto projects.
For instance, in 2021, a group of influencers, some associated with the popular esports organization FaZe Clan, began promoting a new cryptocurrency token called Save the Kids.
The initiative, on the surface, appeared to be a noble cause — using the burgeoning world of crypto to support children in need. The influencers presented it as a win-win scenario: investors could potentially earn money while also contributing to a good cause.
With the backing of FaZe Clan, a community of esports gamers with millions of followers, many of whom are teenagers, the project seemed destined for success.
However, the reality was far from the altruistic image painted by its promoters. Shortly after the token’s launch, its value plummeted. Large holders quickly dumped their shares, leaving many investors with significant losses. Today, Save the Kids is virtually worthless.
Adding insult to injury, Save the Kids claimed to have donated over $80,000 to Binance Charity in June 2021. However, a representative for Binance Charity confirmed that they do not accept altcoin campaigns, and it is believed the donation never happened.
It is worth noting that scammers’ tactics have continued to evolve over time. One of the most common schemes today is the “pump-and-dump“, where influencers promote a new token to inflate its value before selling off their holdings, leaving their followers with worthless assets.
Save the Kids is not an isolated incident. It represents a broader pattern of influencers using their platforms to promote crypto projects that ultimately collapse, leaving their followers to bear the financial burden.
One of the earliest examples of influencer-driven scams in the digital age was CSGOLotto in 2016. The platform allowed users to gamble using “skins,” a form of in-game currency.
The FTC charged two influencers, Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell, with deceptively endorsing the service without disclosing their financial stake in the company. The case ended with a settlement but no fine.
The Bottom Line
The FTC’s new regulations, set to take effect in October 2024, target the sale and purchase of fake social media metrics, such as followers and likes, to curb deceptive practices that misrepresent influence for commercial gain.
These rules also address fake reviews, misleading celebrity endorsements, and other fraudulent activities, with potential fines of up to $50,000 per infraction, holding influencers accountable for the authenticity of their social media metrics.
