Reputation Risk: the Elephant in the Cryptocurrency Room
Reputation risk is one of the biggest risks for cryptocurrency participants and markets. Someone once shared and stressed the importance of protecting ones' credibility. And arguably, the cryptocurrency markets are built on trust. However, the recent news flow concerning class action lawsuits, bankruptcy filings by large crypto lenders like Celsius Network, and hacks are hard to dismiss. Almost all investment in the crypto space is likely to undergo further scrutiny.
The new heavy flow of lawsuits in crypto is certainly not going to help reputation risk at all. A class action lawsuit filed against Celsius Network alleges that the company ran like a ponzi scheme. Binance.US is being accused of misleading investors over Terra, after Terra collapsed spectacularly due to network design in early May 2022. Regulators, like the SEC, have also recently brought allegations against Coinbase that it made false or misleading claims to investors, and possibly had listed unregistered securities.
On the private side, celebrities like Kim Kardashian, Floyd Mayweather, and NBA star Paul Pierce were accused of artificially inflating the price with their endorsements, among other things, for a token called EthereumMax. Safemoon lawsuits have snared even more celebrities. Jake Paul, Nick Carter, Soulja Boy & Lil Yachty were named in that class action Safemoon lawsuit in February. While these celebrities are all being sued for essentially promoting tokens that later almost completely lost their entire value, there are also a few celebs who have tried to make money selling NFTs. Quentin Tarantino was sued by Miramax over his plans to release an NFT collection related to the Pulp Fiction movies. Miramax is claiming trademark infringement, breach of contract and unfair competition. Boldly, even after being sued, Tarantino still plans to move ahead and sell the NFT collection.
Some celebrities are allegedly being sued by both investors and the project itself! Dave Portnoy, founder of Barstool Sports, was sued by investors of Safemoon for tweeting that he had purchased $40k worth of Safemoon under the pretense that he was "shilling" the coin. That investment is now only worth $2,300 at the time of publishing. The project has allegedly sued Portnoy for statements he made on one of his podcasts/shows.
We have long warned about reputational and regulatory risk in the cryptocurrency space. And those concerns are why our stance at CryptoDataDownload is to never promote or endorse any particular cryptocurrency. Depending on the outcome of some of the class action lawsuits discussed above, the trend is that we will likely continue to see an increase of lawsuits as more and more projects inevitably fail. Celebrities, YouTubers, cryptocurrency research groups, and those who have publicly recommended crypto projects are all at risk of litigation.
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