The FCA chairman has warned the public to steer clear of unregulated or uninsured speculative tokens, as adverts pertaining to these could be a “pump and dump” scheme in wait to rob investors of their money.
The chairman of the Financial Conduct Authority in the United Kingdom, Charles Randall, has spoken out against Kim Kardashian’s Instagram commercial promoting the cryptocurrency Ethereum Max.
Randall argues that the Armenian-American diva is luring her 250 million fans into a financial quagmire. He described Ethereum Max as “a speculative digital token launched a month ago by unknown creators,” and claimed that influencers like Kardashian were acting dangerously by instilling “delusions of rapid riches” in their fans.
Randall emphasizes that Ethereum Max is not the same as Ethereum, the most popular cryptocurrency. The token Kardashian is advocating could be a “pump and dump” scheme, in which an insider promotes investment to increase its price, only to sell and “dump” the investment’s value later.
“I can’t say whether this token [Ethereum Max] is a hoax, but criminals regularly pay social media influencers to assist them pump and dump new tokens based on sheer conjecture. Some influencers advocate coins that turn out to be fake,” Randall explained.
Kardashian’s ad, according to the FCA chairman, was an example of “financial promotion with the single largest audience reach in history.” Randall warns people to stay away from unregulated or uninsured speculative tokens.
Cryptocurrency has many critics who are concerned about its volatility and environmental impact. Billionaire John Paulson, who made his fortune investing in hedge funds and forecasted the 2008 housing meltdown, recently slammed cryptocurrencies, claiming that it has no value outside of its inherent scarcity.
In a recent interview with Bloomberg Wealth, the investor warned that all cryptocurrency will “eventually prove to be useless.”
In a Sunday interview with Paulson, Bloomberg Wealth asked if he believed in cryptocurrency.
“No, I’m not,” Paulson stated emphatically, adding, “And I believe cryptocurrencies are a bubble.” They are, in my opinion, a finite supply of nothing.
“As a result, if there is more demand than there is a limited supply, the price will rise. However, if demand declines, the price will fall as well. Except for the fact that there is a finite amount, none of the cryptocurrencies has any intrinsic value.”
“Cryptocurrencies, regardless of where they trade now, will eventually show to be worthless,” the investor continued. They will plummet to zero if the euphoria wears off or liquidity runs out. Cryptocurrencies are not something I would advise people to invest in.
The Bloomberg Wealth interviewers then asked why Paulson wouldn’t want to take advantage of this by “shorting” the currencies.
“We shorted subprime in magnitude because it was asymmetrical — shorting a bond at par with a limited term that trades at a 1% spread of Treasuries,” he explained. As a result, you can’t lose more than the spread in the time frame.
“There is no limit to the downside with cryptocurrency. So, even if I were correct in the long run, I’d be wiped out in the short run. Bitcoin’s value increased from $5,000 to $45,000. It’s simply too risky to short.”
