Influencer marketing is an effective way to reach out to a specific group of people. The SEC charges eight influencers for fraud and the investigation is still ongoing.
The U.S. Securities and Exchange Commission (SEC) has charged eight individuals in New York with fraud in connection with a scheme to use social media influencers to promote stocks, according to an SEC press release on Dec. 18, 2018.
The SEC’s Enforcement Division alleges that since at least September 2017, the defendants have been using social media influencers who post about various products or services on their Instagram accounts, including celebrities and models, to promote stocks without disclosing that they were paid for their posts or when they had been paid.
The U.S. Securities and Exchange Commission (SEC) has filed charges against eight individuals who were involved in a securities fraud scheme that involved paying social media influencers to promote stocks they knew were worthless.
The SEC is alleging that the individuals created shell companies to list penny stocks, then paid social media influencers to promote the stocks on their platforms. The influencers would then receive shares of the stock at no cost in exchange for their promotion, resulting in them being compensated by both the individual and the company.
This type of fraud is not new, but it’s been on the rise with technology and social media becoming more prevalent in our lives.
The SEC has charged 8 influencers for their role in a securities fraud scheme that involved the promotion of investments in private companies.
This is not the first time that influencers were involved in scams. Last year, FTC had to shut down an Instagram-based scam that promised consumers they could get rich by following a few simple steps.
It’s not just Instagram where these scams are happening. Influencers have been found to be participating in other types of scams as well, such as on YouTube and Twitter.