How much does it cost to bring a token to the top? Highlights from the CNBC investigation

Advertising promotion in investments and cryptocurrencies is not always characterized by openness and honesty on the part of agencies or influencers. Some of them are involved in the promotion of blatantly fraudulent schemes, often keeping silent about the paid integrations. In a recent investigation, CNBC reporters talked to crypto influencers and bloggers to find out what projects they promote and how much they make.

Ben Armstrong is one of the most popular crypto bloggers on YouTube, with over 1,5 million subscribers to his BitBoy Crypto channel. Armstrong openly says that he has been paid for several years to advertise services and tokens by various crypto projects. Speaking to CNBC journalists, Armstrong admits that the realization of the consequences of promoting often questionable projects and a “crisis of conscience” forced him to abandon this practice. The blogger's videos led to painful losses for his own viewers who trusted his advice.

In the fall of 2020, Armstrong announced a partnership with the cryptocurrency DistX (DISTX), calling it the most trusted project in his videos. However, the token turned out to be fraudulent; the developers pulled off a classic Rug Pull scheme. When the coin reached an impressive capitalization, the creators of the asset simply withdrew all investor funds and disappeared forever. At the moment, DISTX has lost 99% of its value, collapsing to $0,0002.

Rug Pull is a type of scam in which developers abandon a project, fail to deliver on promises, and take investors' money. Having raised enough money through the PR of the roadmap, which implies sustainable development, the scammers delete the social media and leave the project without support, leaving investors with devalued tokens.

Armstrong says he feels a responsibility to the audience for promoting a fraudulent project. To at least make amends, he used the money he earned from DistX ads to compensate affected subscribers. However, DistX was not the only cryptocurrency that the blogger promoted. Ethereum Yield (ETHY), Cypherium (CPH) and MYX Network (MYX) tokens followed the same scenario. Armstrong told reporters that after the price of the coins began to fall, he deleted videos advertising them. The blogger assures that he is done with the paid promotion of crypto projects forever.

How much do crypto influencers earn?

Armstrong says that five years ago during the ICO boom, many influencers were silent about being paid to promote coins, but today most of them directly disclose the fact of advertising integration to subscribers. The blogger himself shared that he received about $30 000 for one DistX video. According to him, he could have easily made over $100 000 in a week. Many project representatives, when negotiating the deal, asked him not to mention in the video that he was being paid for advertising.

In April, the self-proclaimed “on-chain sleuth” under the nickname ZachXBT posted on Twitter a list of crypto influencers and their social media advertising rates obtained from a marketing company.

New influencer shill price list leak 📸 pic.twitter.com/l1MGgqfldv— ZachXBT (@zachxbt) April 18, 2022

According to a published price list, American singer and actress Lindsay Lohan charges $25 000 per ad post and $20 000 per retweet. Earlier in February, she promoted the crypto project MetaNetflix, which went down several times later.

This is what it gets you https://t.co/hUSFkaztJy— ZachXBT (@zachxbt) April 18, 2022

Other celebrities and bloggers on the list charge between $1 000 and $100 000. Most of the projects they promoted were fraudulent or failed as investments. Some of the personalities ZachXBT mentioned confirmed that the numbers in his study agree with reality, and some said they were overstated.

Authorities' opinions

CNBC reporters also spoke with Joe Rotunda, Director of Enforcement at the Texas State Securities Board. He said that he and the US authorities are aware of the promotions that promote crypto projects. According to Rotunda, most of them are fraudulent schemes.

The regulatory team recently filed a lawsuit against two casinos in the metaverse, Flamingo Casino Club and Sand Vegas Casino Club. The first project, as law enforcement found out, is operated directly from Moscow. Both of these casinos are accused of trying to defraud retail investors by selling tokens as unregistered securities.

Rotunda said they were able to discover these projects thanks to promotional integrations by bloggers on YouTube. The cease-and-desist order against Flamingo Casino Club states that the administrator of the virtual casino hired Influencers and paid them for advertising. Law enforcement also found testimonials on Discord that one of them “attracted a lot of investors to the project through his videos.” As CNBC found out, the YouTube bloggers under the nicknames FLOZIN and Dream Green Show were advertising these casinos. The first said that he was not paid to promote Flamingo Casino Club, but after correspondence with journalists immediately deleted the video.

Questionable ads aren't just found online. In May, an investigation was launched into improper cryptocurrency promotion by House of Representatives member Madison Cawthorn.

According to the case file, Cawthorn bought Let's Go Brandon (LGB) cryptocurrency for between $100 000 and $250 000. He was then spotted in the same photo on Instagram (*owned by Meta, an organization recognized as extremist and banned in the Russian Federation) with the project's co-founder. In a comment on the photo, the House member wrote that “tomorrow we go to the moon.” The day after the photo was published, news broke about the LGB sponsorship deal with the NASCAR racer, which resulted in a 75% jump in the price of the coin. Cawthorn then sold his assets. A few weeks later, when it was revealed that NASCAR knew nothing about the partnership, the coin's price plummeted to a low.

Rotunda warns that regulators only see “the tip of the iceberg.” The more people are interested in digital assets and metaverses, the more fraudsters emerge. He thinks law enforcement should focus even more on these areas.

Taylor Monahan, product manager at MetaMask, speaking to CNBC reporters, spoke out against any cooperation with crypto influencers. She urges everyone involved in the field not to enter into fictitious partnerships, even if they look legitimate. However, Monahan does not support banning online advertising in principle. Instead, she says, the cryptocurrency community should identify paid promotion projects as often as possible to reduce the percentage of malvertising.