Celebrities who have recently created and promoted memecoins on Solana ould be breaking securities laws and “will absolutely catch the attention” of the United States securities regulator, according to lawyers.
U.S.-based public figures, including Caitlyn Jenner, Iggy Azalea (real name Amethyst Kelly), Jason Derulo (real name Jason Desrouleaux), and many others, have launched and promoted crypto tokens using their likeness since late May.
“Nothing gets the SEC to act faster than shilling a memecoin,” Creo Legal founding director David Chung told Cointelegraph.
Chung commented that Jenner — the first to get attention for her token — is “painting a target on her back.”
“The SEC could potentially go after her for selling unregistered securities without an appropriate license,” he added.
Law firm Clyde and Co partner Liam Hennessy agreed, telling Cointelegraph that celebrities “had a bad run in the last bull run for unlawfully touting crypto without disclosing commissions” — noting that Kim Kardashian forked over $1.26 million for pushing EthereumMax (EMAX).
Jenner did not respond to a request for comment sent via her website.
Hennessy noted that the SEC has claimed “nearly all crypto tokens are securities,” and if it lumps these celebrity tokens into its remit, “the issuer would need to be registered with the SEC.”
“If not, there are appreciable penalties and fines for unlicensed activity. The celebrity may not be the token issuer, which arguably takes them away from what will be the SEC’s first area of concern.”
The tokens all launched on the Solana-based memecoin creation platform pump.fun. Jenner and Derulo claimed the alleged serial scammer and celebrity memecoin promotor Sahil Arora helped in the creation of their respective Caitlyn Jenner (JENNER) and Jason Derulo (JASON) tokens.
Crypto analytics firm Bubblemaps has claimed each of the tokens — including Azalea’s Mother Iggy (MOTHER) token, which did not involve Arora — has seen onchain insider activity at their launches, with some wallets profiting millions of dollars.
Jenner and Derulo have publicly denounced Arora, claiming he scammed them in the creation of their tokens, but Arora told Cointelegraph last month that Derulo’s online spat at him was “all orchestrated.”
A Telegram account controlled by Derulo or a member of his team did not respond to questions sent in a message.
Chung said a cryptocurrency’s token release is a “key liability event” for its creators, and “attempting to distance yourself from that event makes sense.”
“If it can be shown that a celebrity has coordinated with Arora and staged a pretend public fall out, then this won’t provide any legal protection.”
He added if the tokens are not legally compliant, then Arora is still “responsible for the token sale even if he is no longer involved with the project.”
Arora did not respond to a message sent via Instagram.
JENNER, JASON and MOTHER are all significantly down from their peak highs. MOTHER, the largest by market cap, is down 84.5% from its June 6 high of $0.23, while JENNER and JASON are respectively down 55.5% and nearly 78% from their peaks in early and late June, according to CoinGecko.
A Telegram account controlled by Azalea did not respond to questions sent in a message. A person reported to be Azalea’s manager did not respond to a message sent on LinkedIn.
It’s not only the SEC that celebrities have to worry about. Some of the tokens’ investors who may be stung by losses could try to form a class action to sue the celebrities — following a list of stars hit with suits for promoting crypto.
Related: Insider trading allegations hit Khamzat Chimaev’s Smash token
“If enough people lose their money, then we could easily see a class action,” Chung added. “The vast majority of memecoin projects end up going to zero, so I’m not expecting anything different here.”
Hennessy said, “There are a host of other requirements around dealing with securities that might make it safer for them to stick with their day job.”
The SEC did not respond to a request for comment by the time of publication.
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