Ben Armstrong says his crisis of conscience came in January of this year, when he realized he had to stop a business practice he – and many others in his line of work – had been engaged in for years.
Armstrong is one of the most viewed crypto influencers on YouTube. His channel, BitBoy Crypto, has amassed more than 1.5 million subscribers. For years, Armstrong said he accepted payments from crypto companies to promote their new products to his large audience of subscribers. It’s a practice he says he now regrets because it led to some painful losses for his viewers.
In the fall of 2020, Armstrong announced his partnership with a cryptocurrency called DistX, calling it his most trusted coin. He said the whole idea of DistX was to stop crypto scams — but Armstrong said in the end, the project itself ended up being a scam. The project team’s rug was pulled, meaning they worked to raise market capitalization and then disappeared – leaving investors holding the bag. The coin is now down 99%, valued at less than a penny.
Crypto influencer Ben Armstrong in his studio recording a live episode of BitBoy Crypto.
CNBC
While accepting paid promotions, Armstrong said he previously earned more than $30,000 for a single endorsement, which included his promotional video for DistX, and could easily make more than $100,000 a month in promotions alone.
Armstrong now says he feels responsible for the losses suffered by his followers. “I mean, of course I do,” he said. “I hate it when we talk about things that don’t work well.”
While Armstrong says he stopped accepting paid promotions in January, other influencers still fill this lucrative market. CNBC found that some of these internet personalities are paid thousands to endorse shady projects. This spring, an anonymous blockchain geek tweeted a list naming 44 crypto YouTube personalities and their prices for paid promotions. Some of these influencers were paid up to $65,000 for a single promotional video, according to that list.
Armstrong says he used the money he earned from promoting DistX to refund his followers after the coin crashed, adding that he felt particularly guilty about how much he was advertised on his channel. However, he says this is the only project he has intervened in that way as investors lost money by taking his advice.
While Armstrong reveals that he is not a trained financial professional, many of the ventures he has promoted have failed. After other cryptocurrency ventures like Ethereum Yield, Cypherium and MYX Network fell in value, he deleted promotional videos for them from his channel.
CNBC reached out to these influencers on the list to verify their fees: Some said the prices were inflated, and those willing to share their prices said they made a minimum of $1,000 for each promotional video.
Unlike Armstrong, who says he disclosed all of his paid promotional videos, some influencers don’t share that they’re being paid enough to close projects. According to Armstrong, many of the companies that contacted him while he was collecting endorsement fees did not want him to tell his viewers that the content was sponsored.
Armstrong said that five years ago many influencers would not disclose that they were paid to close projects, but most influencers today are open about promotions with their viewers.
But state regulators warn there are still influencers who lack transparency. Joe Rotunda, director of the Texas State Securities Board’s division of enforcement, said he has seen paid promotions that not only go undetected, but are promoting fraudulent ventures.
Joe Rotunda, director of the Texas State Securities Board’s division of enforcement.
CNBC
Rotunda and a team of regulators recently filed enforcement actions against two casinos in the metaverse, the new digital frontier where users can attend virtual concerts, buy digital assets or even gamble in a casino. The actions cited Flamingo Casino Club and Sand Vegas Casino Club, accusing them of trying to defraud retail investors by selling unregistered securities.
Neither casino responded to requests for comment.
“We need to identify the scams that are out there, especially the scams associated with the metaverse,” Rotunda said.
Rotunda said his team found the fraudulent metaverse operations through promotions by crypto influencers on YouTube. He referred to two well-known influencers who promoted Flamingo Casino Club in videos that reached about 80,000 viewers.
The cease and desist order against Flamingo Casino Club said one of the influencers promoting the casino was “recruiting promoters to engage and pay to advertise their products through its YouTube channel.” He also found messages on a popular chat platform that said one of these influencers “brought too much [of investors] from their videos”.
CNBC contacted the two influencers named in the enforcement action as a promotion of Metaverse Casinos accused of defrauding investors about whether they received undisclosed promotion payments.
The influencer known as FLOZIN said he wasn’t paid for his endorsement, but it appears he deleted his promotional video after CNBC started asking questions. Dream Green Show, the second influencer, did not respond to CNBC’s request for comment.
Controversial promotions aren’t just happening through YouTube crypto-tokens. The House Ethics Committee announced in May that it was investigating potentially improper cryptocurrency promotions by Rep. Madison Cawthorn, a Republican from North Carolina.
Disclosures released after the committee’s announcement revealed that Cawthorn purchased between $100,000 and $250,000 worth of Let’s Go Brandon cryptocurrency. He was seen in a photo with the coin’s co-founders on Instagram the following week, commenting “Tomorrow we go to the moonThe news came the day after a sponsorship deal with a NASCAR driver, causing the coin’s price to jump 75%.
Cawthorn, who lost his primary election in May, said he sold between $100,000 and $250,000 of the currency the day after the rally. Within the next few weeks, NASCAR reneged on the deal and the currency’s value collapsed.
Taylor Monahan, head of product at digital currency wallet MetaMask, said she is “vehemently opposed” to all partnerships with crypto influencers.
Taylor Monahan, product lead at digital currency wallet MetaMask.
CNBC
“I would urge anyone, even if they consider themselves legitimate, not to create these types of fake partnerships,” Monahan said.
Monahan said she is reluctant to support banning online promotions because of the negative effects she has seen from limiting and regulating cryptocurrencies. Instead, she says the crypto community can come together to call partnerships and make them less common.
Armstrong said the decision to ban paid promotions has taken a burden off him because he can post freely. But he said he understands why others continue to create sponsored videos.
“Obviously, we did it for a long time because it’s a good way to build your business,” Armstrong said. “But you just have to do it in an honest way.”
Rotunda warned that the more interest in decentralized currencies and metaverses grows, the more scams will appear. Regulators, he said, should focus on digital asset transactions because there is still more crime to uncover.
“What we’re seeing is the tip of the iceberg,” Rotunda said.
However, the paid promotions business is not what it was in 2021, with the crypto market down 49% year-to-date. Armstrong said that in a bear market, less legitimate crypto influencers may face more scrutiny and fan their followers.
— Érica Carnevalli and Margaret Fleming contributed to this article.
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