Celebrity Endorsements in Crypto: A Red Flag or Just Marketing?

Celebrity backing can make a big difference in the success of a crypto project, but that doesn't mean the endorsement of a famous person makes it trustworthy.

Celebrity endorsements can play a significant role in the success of a crypto project. However, it's crucial to note that not all celebrity-backed ventures are trustworthy.

According to a 2023 research paper by two former United States Securities and Exchange Commission economists, there is a link between a celebrity endorsement of a crypto project and the likelihood of its dubiousness.

During their research, White and Wilkoff found that in 2019, 26% of the initial coin offerings (ICOs) they examined were likely scams. That number increased to nearly 40% by 2023.

While celebrity endorsements can attract consumer attention, they shouldn't be the sole factor in determining a project's legitimacy, said Amy-Rose Goodey, managing director of the Digital Economy Council of Australia (DECA). Thorough research and a critical eye are key.

“It always comes down to due diligence and a keen eye for detail. A major red flag would be if all the essential elements are missing,” Goodey told Cointelegraph.

A number of big names, including sports stars Shaquille O’Neal and Tom Brady, actresses Gwyneth Paltrow and Paris Hilton, and many more high-profile public figures have lent their names to crypto projects that have ended up going bust or disappearing altogether.

According to Goodey, celebrity backing doesn’t always mean a project is untrustworthy and should be avoided as long as all the key elements for success are present and transparent.

“Celebrity endorsements have long been a staple in the marketer’s toolkit across every industry, dating back to the 1700s when ‘royal endorsements’ served as the precursor to modern celebrity branding,” she said.

A lack of transparency isn't just a red flag for potential investors; it can also attract the attention of regulators.

In March of 2023, eight celebrities, including actress Lindsay Lohan and YouTuber Jake Paul, were among a group of people charged by the SEC for not disclosing that they were paid to shill a crypto project.

Around the same time, a class-action suit was filed against influencers who helped promote the now-defunct crypto exchange FTX without disclosing the compensation they received.

Celebrity endorsements for crypto projects aren't always a red flag, but it often depends on the project and the credentials of the famous person, said Robert Hoogendoorn, head of content at blockchain analytics platform DappRadar.

“For example, various sports heroes have backed fantasy sports platforms,” Hoogendoorn told Cointelegraph, adding that there are over 1,673 memecoins listed on CoinGecko with a combined market cap of around $38 billion.

However, that only scratches the surface, as less than 1.5% of the 1.7 million tokens launched via Pump.fun since January ever reached a total value of more than $63,000.

Since May, several public figures, including Caitlyn Jenner and Jason Derulo, have launched and promoted crypto tokens using their likeness.

Crypto analytics firm Bubblemaps claims to have witnessed onchain insider activity during several of these coin launches, with some wallets profiting millions of dollars.

Overall, Hoogendoorn said it’s often safer to be skeptical of a project backed by a celebrity, especially “when they praise a certain token you’ve never heard of, you know the project paid $50,000 for the shoutout.”

However, he added that there are exceptions out there, depending on the context.

“In general, celebrities promoting crypto projects tends to be a major red flag, and we’ve seen that with various celebrities, tokens and NFT [non-fungible token] collections,” he said.

“However, celebrities genuinely backing a project through investment rounds should not necessarily be considered a red flag. There’s a difference there.”

A celebrity advertising a crypto project could be a red flag in certain cases, said Ken Gamble, executive director and chairman of international private intelligence and cyber investigations firm IFW Global.

In his experience, there are a staggering number of fake celebrity crypto ads shilling products online that are scams, stealing famous people's likenesses and voices through deepfake technology and artificial intelligence.

In these cases, the celebrity might not even know they have endorsed a product. As was the case with billionaire Australian mining tycoon Andrew Forrest.

In July of 2022, he launched legal proceedings against Meta over Facebook ads that used deepfakes of his image to promote scam crypto schemes after discovering them online.

“As a subject matter expert in international cyber fraud, I have never seen a genuine endorsement of a crypto project by a real celebrity,” Gamble told Cointelegraph.

Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC), has also launched legal action against Meta over the prevalence of fraudulent celebrity scam ads on the platform.

The ACCC says over

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