In early June, when Brayden LeBlanc saw four influencers from the popular FaZe Clan esports team promoting a cryptocurrency project, he thought he was about to make a safe and profitable investment.
The project, a charitable cryptocurrency token called Save the Kids, launched on June 5, and its creators have promoted it as a way to make the world a better place. The FaZe Clan members, who each have millions of social media followers, made her feel like something new and exciting. LeBlanc, 21, of Saint John, New Brunswick, Canada, initially invested $ 94.
But within hours of the cryptocurrency token’s launch, its value crashed. LeBlanc’s investment is now worth around $ 5.
“I feel like I’ve been played,” said LeBlanc. “These FaZe members are people that I and millions of others admire. We want to be like them.
While members of the FaZe Clan who promoted the token have since been withdrawn or suspended by the team for their involvement, the episode has become one of the most publicized examples of what industry watchers and an emerging group of online watchdogs see as a problematic dynamic in which influencers promote crypto -currencies – with young people particularly sensitive to the hype.
The cryptocurrency boom of 2020 and early 2021 has attracted a new wave of interest from mainstream investors, particularly from young people like LeBlanc, as more established cryptocurrencies like bitcoin and ethereum, along with alternative coins like dogecoin, have skyrocketed in value.
This has helped inspire a wave of new cryptocurrencies to enter the market, some of which have turned to celebrities and internet influencers to become ambassadors and help gain traction. Kim Kardashian, Floyd Mayweather, and Logan Paul are just a few of the personalities to promote altcoins – a catch-all term for cryptocurrencies other than bitcoin.
But some have gone wrong. LeBlanc alleged that the Save the Kids token was a pump and dump – a well-known ploy to increase the price of an asset. At least one of the FaZe Clan has said he has also lost money and believes that a “con artist” who abused the trust of influencers is to blame.
“I feel like me and the other investors have been used as a way to get money easily,” LeBlanc said.
Over the past year, the number of cryptocurrencies has doubled to 10,000 according to tracking site CoinMarketCap. And although it appears the market is booming, more than $ 80 million has been lost in crypto-related scams since October 2020, according to a report released this year by the Federal Trade Commission.
“With bitcoin’s value soaring in recent months, new investors may be eager to jump into the action,” said Emma Fletcher, FTC analyst. “All of this plays into the hands of the crooks. “
The report found that people aged 20 to 49 were five times more likely to lose money in cryptocurrency investment scams than older groups. The UK’s Financial Conduct Authority also revealed in a report this year that new and younger audiences are engaging in high-risk investments like crypto and are often driven by emotions and feelings.
He found that the reasons for investing were often based on competition and novelty, rather than on “conventional and more functional reasons” such as saving for retirement.
New cryptocurrency technology has created opportunities for scams, according to Rachel Siegel, who provides crypto-related educational content to more than 150,000 subscribers on Twitter.
“The Save the Kids scam was very similar to a lot of other scams we see in the crypto space,” Siegel alleged. “I think there are a lot of good ways to use this technology. It just doesn’t exist long enough to clearly decipher legitimate plans from dishonest plans.
The FTC declined to say whether it was investigating the Save the Kids case.
The allure of the overnight wealth generated by cryptocurrencies combined with the influence of widely followed social media stars is seen by some in the cryptocurrency industry as a recipe for disaster. Lucas Dimos, 20, is one of a group of social media influencers trying to counter this problem. On his TikTok account, he tries to offer reality check to his nearly 300,000 subscribers over the exuberance of the crypto market and warns people not to expect overnight success. .
“People go beyond pallor and play more than they should,” he said, adding that a number of people have contacted him, claiming they lost half of their tuition fees by investing in crypto.
“These people are not investors, they are gambling addicts. We have to stop treating it like a casino,” Dimos said. “Do your own research, invest in good, fundamentally sound projects, and never invest more than you can afford to lose. … These three things are all I keep hammering in people’s heads because it can get really hot really quickly.
He also said there was not much to stop influencers from profiting from their influence with little oversight.
“We’re in the Wild West right now,” he said. “The sheriff is out of town. No one will come knocking on your door.
Other social media figures have gone further, forming a sort of informal watchdog subculture to try to identify the scams and alert people to them. A YouTube creator named Coffeezilla (his real name is Stephen but he retains his last name online due to the video content he creates) made a video on June 24 highlighting suspected issues with the crypto Save the Kids currency. He alleged that the developers of the token secretly changed his code at the last minute to allow early investors to empty their tokens and escape with the money.
“This to me solidified it as an ultimate scam,” he asserted. “It’s a premeditated scam. To me that makes it even more blatant, and then you combine the fact that these are kids, and you have the holy grail of shady influencer crypto scams.
A few days after Stephen posted his first video on Save the Kids, Frazier “Kay” Khattri, one of the FaZe Clan influencers who promoted the project, apologized to his fans saying it was “irresponsible” of him to promote cryptocurrencies “without knowing more, and now knowing that they can do more harm than good.”
Khattri also announced on YouTube that he had uncovered “important evidence that a dishonest person abused his trust with me to scam everyone”, and that he and his lawyers were putting together a case to hold the “con man” responsible.
According to Stephen, Khattri’s lawyers issued him a letter of cessation and abstention for “false and defamatory public statements”.
The other FaZe Clan influencers involved have not released public statements and have not responded to an NBC News request for comment. However, on Sunday, another member of the FaZe Clan, Teeqo, posted on Twitter that “life has been an absolute nightmare for the past month” and that he is “not sure when or if I will be back”
Stephen said he sees his videos as a chance to put pressure on people who may be trying to take advantage of young people and people with influence.
“If no one holds anyone responsible, there is no fear,” he said. “It’s like you’re working underground. “
But he also said he saw the need for authorities to intervene.
“I can report on this until I’m blue in the face but… until someone is in real trouble for this, I think there’s a danger of this continuing,” he said. he said, adding: “I think law enforcement has to get involved at some level before people really start to care.