Inside the shady world of influencers promoting cryptocurrency

Everyone knows Kim Kardashian, the influencer and reality TV show star, but do you know Kim Kardashian, the cryptocurrency advocate?

Earlier this month, the billionaire mega star posted something a bit out of the ordinary to her Instagram Stories. Kardashian was promoting a new alternative cryptocurrency, or altcoin, called Ethereum Max.

And she’s not the only one.

YouTubers, streamers, and all kinds of social media influencers are jumping aboard the altcoin train. They’re urging their followers to look into new altcoins on a regular basis, if not flat out encouraging them to invest.

What’s going on here? Why are so many of them promoting it, and how invested are they personally?

A flood of altcoins

New cryptocurrencies have been popping up everyday in order to take advantage of the hype around well-known crypto, such as Bitcoin and the meme-inspired Dogecoin, as the more established cryptocurrencies’ value spiked to new heights.

If you look at forums on Discord, Reddit, and Telegram, you find dozens of new cryptocurrencies launching every week. But even if you mostly hang out on more mainstream social media channels like Twitter and YouTube, you very likely have seen some of your favorite internet celebrities promoting one of these newly launched altcoins over the past few months.

Altcoins — which are also often referred to as “memecoins” or even “shitcoins” – are cryptocurrencies based on some sort of online joke or tied to some sort of money-making scheme.

While Bitcoin and other established cryptocurrencies are already considered highly volatile investments, altcoins are even more risky. These coins are usually built on existing blockchains and buying them often requires a number of steps and hoops to jump through, and there are usually various transaction fees.

“Let’s be clear, these things are absolutely worthless bullshit,” David Gerard, author of Libra Shrugged: How Facebook Tried to Take Over the Money and Attack of the 50 Foot Blockchain, explained to me in a phone conversation.

“You only ever hear from the people who won and never from the people who lost.” he continued. “If you buy the coin, your money is gone, and maybe you can get it back if you sell the magic beans to someone else, which is basically the story of crypto in general.”

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Gerard, a longtime critic of cryptocurrency, explained to me how what we’re seeing now with altcoins has permeated throughout cryptocurrency since the earliest days.

“As soon as you could exchange Bitcoin for money, every scammer came out of the woodwork,” he said. “A lot of people [involved in crypto] have a history of scams.”

Gerard brought up one of the earliest altcoin scams, IXcoin, which launched in August 2011.

“The developer put out this coin and he disappeared less than a month later,” he explained. “Once he did that, the floodgates were open and this is where we got thousands of cryptos from. It’s basically the same sort of scheme, to try to make the sucker feel like they’re a big player.”

Marie Springer is an Adjunct Associate Professor in the Department of Public Management at John Jay College, who recently authored the book The Politics of Ponzi Schemes: History, Theory and Policy. I reached out to her in order to find out exactly how to classify these altcoins.

“What you’ve described is called pump and dump,” Springer explained in a phone call where we walked through the various altcoins and their marketing schemes. “It could also be a ponzi scheme or a pyramid scheme or even both.”

Pump and dump schemes are basically when someone tries to boost the value of an investment, such as a stock or cryptocurrency, by generating fake news or buzz around it.

“I can’t tell you how many Ponzi schemes have done exactly what you’re describing, using exactly the mechanisms you’re referring to,” she explained. “The only difference is usually these schemes are done with fiat currency.”

So when it comes to these coins being promoted by influencers on social media, they appear to be straight-up scams.

FaZe Scam?

This month FaZe Clan made history as the first ever gaming organization to grace the cover of Sports Illustrated magazine.

The esports team and streaming superstars have amassed a huge following, with tens of millions of followers across their social media accounts and video channels. FaZe Clan has seen so much growth thanks to their young fans that the group was even able to raise $40 million in funding last year.

With all that success, why are so many members of the group “shilling” — as some of their disgruntled fans like to call it — altcoins?

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Just last month, for example, FaZe Banks, one of the group’s founders, tweeted out a promotion for a cryptocurrency called BankSocial.

“Giving away $10,000 to one lucky person that RT, likes, and follows @BANKSOCIALio,” he posted on May 28. “This is a project I fuck with heavily and truly believe it’s the next one to pop. $10,000 winner chosen at random in 24 hours. Good luck you sexy fucks. #BSOCIAL (not financial advice lol).”

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Banks included a rocket ship emoji, an image commonly used by cryptocurrency advocates signaling a coin will be successful and its value will rise “to the moon.”

Shortly after FaZe Banks tweeted this, the price of BankSocial spiked to a high of around $0.000015 due to all the new investors buying into the coin. Another member of FaZe Clan, FaZe Kay, replied to Banks’ tweet about his own investment in BankSocial.

“I’m 2x already,” he shared, also including a rocket ship emoji along with a fire emoji.

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Later that same day, the price of BankSocial would tank. BankSocial has now lost more than 90 percent of its value. Its peak was the day FaZe Banks promoted it. It currently sits at $0.0000015. Please note the full extra decimal place from its height after FaZe Banks’ tweet.

That $10,000 FaZe Banks was giving away in BankSocial would be worth roughly around $1,000 today. As for who won the giveaway, it’s unclear. FaZe Banks has since deleted the tweet about BankSocial, the one about the giveaway that claimed it was a project he truly believed in.

In fact, he has not mentioned BankSocial since May 28. His followers have tweeted at him trying to find out more information about the giveaway as well as sharing their disappointment in the promotion of the coin in the first place.

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Others have speculated that for FaZe Kay to have doubled his money in BankSocial, like he exclaimed in his tweet, he would have had to have invested in it before FaZe Banks posted his promotion of the altcoin, meaning he was possibly given a heads up about the spike in price.

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As for why FaZe Banks promoted the coin to begin with, it’s possible he really does believe in it. However, a Reddit comment from a “staff member” of the BankSocial team named Michael disclosed that they worked with FaZe Banks in at least some fashion to “pump” the coin.

When a redditor asked why FaZe Banks is “hiding his involvement” with BankSocial, Michael, who goes by the username u/L3NZAI and is also the the administrator of the BankSocial subreddit, replied “influencer attention was sought in the beginning, but no longer wanted.”

“Influencer pump was a mistake,” said u/L3NZAI. “We’ve moved on.”

How these scams get influencers on board

So how do certain altcoins go from one of the hundreds being pitched each month on a subreddit to being heralded by an influencer to their millions of followers?

Of course, it’s possible these influencers have found a crypto project they truly believe to be a good investment opportunity…. But for most influencers what’s more likely is, like Faze Banks, they are being paid to push to push an altcoin by its developers.

And it hasn’t gone unnoticed. With the rash of online influencers pushing all sorts of different altcoins over the past few months, some influencers have started speaking out and shining a light on what’s going on.

Dennis Feitosa is a popular YouTuber who runs a satirical commentary and news channel called Def Noodles. He is one of the first I could find who tracked influencers who were promoting altcoins and exposed them.

“I can usually tell when a trend is starting based on how quickly it expands and this was so fast,” he explained to me in a phone conversation. “It was in a matter of like a week. All these major influencers were [promoting altcoins]. There was something really fishy here.”

YouTubers The Nelk Boys recently shared that they’ve been approached with multiple offers to promote various altcoins.

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So what’s in it for your favorite influencer when they offer to do these altcoin giveaways to promote them? According to The Nelk Boys’ own account of the schemes, influencers are offered free altcoins in exchange for promotion. A number of other influencers have anonymously gone on the record to confirm this as well.

Cody Ko, a popular YouTuber with millions of subscribers, went public last month with his own experience detailing why influencers are pushing these altcoins. Ko explained how he was constantly being hit up to promote pump and dump “shitcoins.” Sound familiar?

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Taking advantage of their fans

Adin Ross is a popular Twitch streamer with millions of followers. On May 26, Ross went live on his Twitch stream and promoted an altcoin called MILF Token. In his stream, he basically confirms the business model that was outed by Cody Ko and the Nelk Boys.

“I did get sponsored by a fucking crypto today,” Ross says during this stream. “They’re paying me a lot of fucking money to do this shit. It’s, like, three shout outs in one hour so I’m going to fucking do it.”

“Not just that,” he continued. “I get to give out $20,000 of the coin to you guys. It’s a lot of fucking money.”

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MILF Token’s developers promoted Ross’ stream as well. Ross also livestreamed the process of how to purchase MILF Token for about 20 minutes.

“Your boy Aiden is going to be investing in this shit,” he says during the stream.

If one of Ross’ fans invested $100 in MILF Token during his stream, they would have approximately $10 today.

However, the most revealing part of the particular instance is what Ross would go on to say about MILF Token on his stream just three weeks later.

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“By the way, that MILF Token shit I did a while back? I already told you guys don’t buy that shit,” Ross said to his fans between laughter. “I got paid a bag to do that shit. Like, I don’t give a fuck. I hope none of you guys actually bought it.”

Some of his fans tweeted at Ross, outraged that they put money into the altcoin, saying how the Twitch streamer was still promoting MILF Token just in the last week.

“It’s unbelievable! He’s literally admitting that he promoted something shady to his audience,” Feitosa said to me about Ross. “This guy gets 100,000 concurrent viewers, he’s the fastest growing Twitch streamer right now, he gets million dollar deals with gambling sites, and this is what he’s doing?”

The rug pull

Beyond being paid to simply market altcoins, some influencers have more vested interest in promoting certain cryptocurrency.

Sam Pepper was a popular YouTuber who was accused of rape and sexual assault in 2014. Since then, he has re-emerged as a TikTok star and taken up promoting altcoins. In April, Pepper was accused by his followers of being part of an altcoin scam.

As Feitosa explained to me, Pepper allegedly had invested in an altcoin called MoonPug Token during a presale, which is a window for investors to buy in before the coin officially launches. Altcoin developers often gift coins to influencers in exchange for promotion or allow their friends to invest during this time while prices are at their lowest.

Pepper then promoted the coin to his followers on launch day. MoonPug quickly rose before a big sell-off caused the altcoin to completely crash. However, Pepper’s followers noticed that just four wallets held the vast majority of MoonPug, leading them to accuse Pepper of allegedly taking part in a pump-and-dump rug pull scam.

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A rug pull is when crypto developers pump up a new coin and then immediately cash in their large holdings, causing the altcoin to tank. The developers then drop the project and disappear with investors’ money.

Pepper apologized to his followers and attempted to explain what went down. He promised to give away his MoonPug tokens and help holders of the altcoin. He hasn’t tweeted about it again since then. MoonPug is now a dead project.

They just keep talking shit(coins)

On April 30, Tana Mongeau posted a video to her Instagram Stories.

“Can you believes my ownership in ‘Titscoin’ just bought me this beautiful Rolls Royce?” she says to the camera, while tilting the camera to show inside the vehicle.

She follows it up with a clear request: “Get yours now.”

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Mongeau also posted videos promoting the altcoin to her TikTok account. Between Instagram and TikTok, Mongeau’s promotion of Titscoin, which marketed itself as a cryptocurrency that donates to cancer research, reached more than 11 million of her followers.

The crypto saw a brief spike that day, however, Titscoin was already on a downward spiral, tanking from its peak less than a week earlier.

If you invested $100 on the day Mongeau claimed her Titscoin investment resulted in the purchase of a Rolls Royce, you would have approximately $2.50 today.

At least one of the members of FaZe Clan, FaZe Kay, also happened to promote Titscoin on the same day as Mongeau. Unlike Mongeau, who did label her videos as an “#ad,” FaZe Kay did not disclose whether this was a paid promotion.

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In fact, Kay has perhaps promoted more altcoins than any other influencer: RICH Coin, Moonportal, SafeGalaxy, Eclipse Token, the list goes on.

Just as this piece was set to be published, FaZe Kay deleted his tweets linked above promoting altcoins.

A collection of recently deleted tweets from FaZe Kay promoting altcoins.
Credit: Screenshot: mashable

FaZe Kay frequently holds giveaways to promote altcoins, which never include any disclosures as to what FaZe Kay’s relationship with the altcoin is.

And each of the altcoins that FaZe Kay has promoted have followed a similar pattern. Influencers pump them, the value rises for an extremely limited window, major investors dump when it reaches the peak, and the young fans of people like FaZe Kay are left holding the bag.

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The most recent example is the Save the Kids token.

This altcoin launched earlier this month and had major influencers behind it. FaZe Clan members Kay, Teeqo, Jarvis, and Nikan, along with YouTuber RiceGum, not only promoted this altcoin on social media, they appeared on its website and in marketing videos as “ambassadors.”

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Save the Kids promised investors that their money would benefit kids, as each transaction would be taxed and one to three percent of it would be donated to a children’s charity. The charity angle is a typical marketing scheme with a lot of these new altcoins.

Launching on June 5, Save the Kids hit as high as $0.02. Just hours after that high, it tanked. If you invested $100 in Save the Kids on launch day, it would be worth around $6.50 today.

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It gets worse, however. On June 17, just 12 days after the coin launched, Save the Kids asked its holders to meet in the project’s Telegram channel for an announcement.

The Telegram administrator claimed that Save the Kids had been abandoned by its founder, taking all the project’s funds with them. While the developer who was contracted to work on the altcoin claims he’s trying to figure out what to do next, Save the Kids token is basically dead.

A screenshot of the Save the Kids Telegram announcement
Credit: screenshot: mashable

FaZe Kay, FaZe Teeqo, FaZe Jarvis, FaZe Nikan, and RiceGum have not commented publicly about Save the Kids since its launch. Their images and promotional tweets still appear on the altcoin’s website. Fans who’ve tweeted at them with concerns about their investment seem to have been ignored.

What can be done?

Right now, cryptocurrency as a whole is pretty much the wild west — with few rules and almost no regulation or oversight. But there are very real consequences for the people who invest, and especially those who sink money into scammy altcoins.

Feitosa told me about the posts he’s seen from people who’ve lost money by investing in altcoins promoted by their favorite influencers.

“I’ve seen threads with hundreds of people saying I lost five grand, I lost my life savings,” he explained.

To be fair, the problem isn’t just with social media influencers. Boxer Floyd Mayweather has promoted altcoins, and so has billionaire Elon Musk.

Mark Cuban, the billionaire tech investor and owner of the Dallas Mavericks, wrote a blog post on June 13 that hyped up two specific alternative cryptocurrencies, including TITAN. At the time, TITAN token was trading as high as $65.

Just four days later, major investors bailed, and the coin’s value plummeted. It’s currently worth $0.0000000851. In an interview with Bloomberg, the Cuban says he lost money from investing in the coin. He chalked up the bad investment to being “too lazy to do the math.”

“If you’re promoting things that turn out to be unregistered securities and you don’t state what your compensation is, you can be busted,” Gerard explained, referencing charges celebrities like Floyd Mayweather and DJ Khalid received in 2018 for promoting cryptocurrencies. “If people know it’s a promotional deal, fine, but you have to say so.”

The U.S. Securities and Exchange Commission (SEC) has recently stepped up, especially over the past year, and have brought cases against some of the worst bad actors in the space. However, even the SEC has said their hands are tied in some respects because the industry is so new. SEC chairman Gary Gensler recently “urged” Congress to act and pass laws regarding cryptocurrency.

“I had a meeting with the SEC after my book came out and I was a bit shocked that someone there asked me if I had heard of any Ethereum-based pyramid schemes,” Spring explained to me. “I said to her that they’re around all the time. I said all you have to do is follow the cryptocurrency exchanges and you’ll see that they are starting and ending all the time.”

With bigger and more mainstream names now promoting these risky investments, it’s clear that the problem will only continue to get worse.

“I think an important factor that isn’t talked about is that everything went nuts in 2020,” Gerard told me. “We had the pandemic, all the markets crashed, even Bitcoin. Everyone’s desperate right now.”

So, many of those people invested in now-worthless altcoins because their favorite influencers told them to.