Charles Randall, the head of the United Kingdom’s Financial Conduct Authority, has spoken out against Kim Kardashian’s Instagram ad for a cryptocurrency known as Ethereum Max.
Randall claims that the Armenian-American celebrity is potentially leading her 250 million followers into a dire financial trap. He called Ethereum Max “a speculative digital token created a month before by unknown developers,” and added that influencers like Kardashian were behaving irresponsibly by giving their followers “delusions of quick riches.”
Randall stresses that Ethereum Max is not the same thing as leading cryptocurrency Ethereum. The token Kardashian is promoting may have the qualities of a “pump and dump” scheme– a situation where an insider promotes an investment to boost its price only to subsequently sell and ‘dump’ the investment’s value.
“I can’t say whether this particular token [Ethereum Max] is a scam, but social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all,” said Randall.
Kim Kardashian’s cryptocurrency ad had “the single biggest audience in history”
The FCA chairman also said that Kardashian’s ad was an instance of “financial promotion with the single biggest audience reach in history.”
Randall advises people to avoid speculative tokens that are unregulated or uninsured.
Cryptocurrency is plagued with detractors over its volatility and environmental impact. Billionaire John Paulson, who made his money investing in hedge funds and who predicted the huge housing crash in 2008, has recently offered a stringent critique of cryptocurrency as having no value outside of its own scarcity.
The investor stated in a recent interview with Bloomberg Wealth that all cryptocurrency will “eventually prove to be useless.”
Bloomberg Wealth asked in their Sunday interview with Paulson if he was a believer in cryptocurrencies.
“No, I’m not,” Paulson relied, adding “And I would say that cryptocurrencies are a bubble. I would describe them as a limited supply of nothing.
“So to the extent there’s more demand than the limited supply, the price would go up. But to the extent the demand falls, then the price would go down. There’s no intrinsic value to any of the cryptocurrencies except that there’s a limited amount.”
The investor went on to opine that “Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies.”
Bloomberg Wealth interviewers then asked why Paulson himself wouldn’t want to “short” the currencies to take advantage of this.
He replied that “The reason we shorted subprime in size was because it was asymmetrical — shorting a bond at par that has a limited duration that trades at a 1% spread of Treasuries. So you can’t lose more than the spread in the duration.
“In crypto, there’s unlimited downside. So even though I could be right, over the long term, in the short term, I’d be wiped out. In the case of Bitcoin, it went from $5,000 to $45,000. It’s just too volatile to short.”