Celebrity endorsers should pay up and own up to money mistakes 1

Celebrity endorsers should pay up and own up to money mistakes

Aneth Ng-Lim

Posted at Mar 28 2023 12:46 PM

 Consumers are largely influenced by what they see and hear when it comes to choosing a product or a service. This is why advertising remains a multibillion-dollar business today. Whether you are watching free television, or browsing Instagram, or checking out YouTube, or just walking down grocery aisles, it is impossible to escape all the paid advertising messages increasingly targeted to your interests.

To make their advertising more engaging, companies have been using celebrities as endorsers. These personalities use their fame to sell almost anything under the sun, for the right endorsement contract price. 

Now, there are “woke” consumers who understand that these celebrities likely are not really using that shampoo, or eating this cereal, or paying with that credit card. But they are sadly a minority. Most consumers are eager to support the brands that their idols use or wear or eat. I suppose they see this as a natural extension of supporting their idols, and because of their vulnerability, I believe their idols also have a responsibility to protect their fans.

And this is why I welcome the news of celebrities being charged by the US government over cryptocurrency endorsements. The US Securities and Exchange Commission charged eight celebrities, including actress Lindsay Lohan, boxer Jake Paul, rappers Soulja Boy and Lil Yachty, singers Ne-Yo, Austin Mahone and Akon, and adult film star Kendra Lust for violating laws in touting cryptocurrencies.

Isn’t this unfair? Isn’t it their job to promote and endorse?

You may think this if you are a fan of any of the eight that were charged. There are actually other celebrities that also hyped virtual currency in high-profile commercials including LeBron James, Matt Damon and Reese Witherspoon. With the crypto price volatility and sell-offs, they have faced criticism for not highlighting the risks. But what makes this second list different from the first list is that those eight celebrities did not disclose that they were paid to promote cryptocurrency. And considering the mounting losses small-time investors have suffered by being swayed to buy the crypto assets that these eight celebrities endorsed, they have to face the consequences.

They are innocent until proven guilty, right?

Yes, that is the legal due process. But guess what? Six of the eight have agreed to pay a total of over $400,000 in disgorgement (meaning a situation in which a person is forced to pay back money that he or she made in an illegal way), interest and penalties to settle the charges, without admitting or denying anything. The speed with which they wanted to close and bury the issue makes them look not so innocent.

Maybe they were also fooled, and suffered losses too.

That could be, but there are laws that govern endorsements of monetary investments. While it is not illegal to promote an investment, you need to disclose that you were at least paid to do so. And that’s why Matt Damon, LeBron James and Reese Witherspoon are probably cringing whenever their crypto commercials are played, but they were upfront about being paid endorsers and so are off the hook.

Then, who can give the best investment advice?

There is no easy answer to this question. We all have different money priorities, and need customized advice to meet those goals. But generally, you want advice that helps you make an informed decision. You also want that advice to come from someone who will not directly benefit from your action, like someone who will earn a commission when you say yes. Not to say there is anything wrong with earning a commission. Insurance agents, real estate brokers, all make a decent living, and they are transparent about the potential commission they will make. This is why it would be good to discuss their offers with an objective third party. I would be more careful about those who will not tell you that they will earn something from what they are pushing to you.

If it’s too good to be true, it most likely is.

We all want to earn the most return for our hard-earned money. But someone offering to double your money in a year, when the market interest rate is about 5% to 6% should make you suspicious. Where will that extra 94% or 95% come from? In his commercial, Matt Damon actually compared the advent of virtual money to the development of aviation and spaceflight! That argument may be enough for some who do not want to miss out on the next big sunrise industry to put money in crypto. But while I like Matt Damon, I don’t think he has the right credentials to make the comparison. And while I will watch his next film, that movie ticket is all I am willing to invest for him. For the rest, I will listen to the real money experts. 


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Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.