Teens are getting into investing

It’s not just older Gen Zers who have interest in the stock market — a 2022 study from Fidelity found that 1-in-5 teens have started investing, while two-thirds plan to start investing before graduating college or earlier.

Teenagers can get their parents to sign them up for stock trading accounts. And there’s technically no legal age limit when it comes to owning crypto — although some exchanges may restrict people under 18 from signing up.

Even TikTok star Charli D’Amelio received Bitcoin for her 17th birthday from cryptocurrency app Gemini last year, despite not being old enough to trade on the platform. The family posted a picture on Instagram to their large following, thanking Gemini for the gift.

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Celebs are promoting financial products to their fans

Celebrities and Youtube and TikTok influencers often generate income from sponsored posts and paid partnerships on their social media platforms.

Kim Kardashian made headlines earlier this month when she was fined $1 million by the U.S. Securities and Exchange Commission (SEC) for not disclosing that she was paid $250,000 to promote a crypto asset. She’s also agreed to not promote any crypto assets for three years.

She’s not the only celeb who’s endorsed cryptocurrency over the past couple years — the market has since crashed hard over the last year — but she is one of the few to encounter legal trouble in the aftermath.

Under the current federal securities laws, anyone who promotes crypto assets “must disclose the nature, source, and amount of compensation they received in exchange for the promotion," said Gurbir S. Grewal, director of the SEC’s division of enforcement, in a press release detailing the charges against Kim Kardashian earlier this month.

But it’s hard to regulate how content creators advertise, and the ones who have smaller audiences may not think they’ll face repercussions, says Lorenz.

“It's unclear when things are even an ad, it's really tough to police.”

She adds that making an example of Kardashian is useful, but many online influencers may continue to endorse risky assets for an easy buck until more is done by regulators. And there are still issues even when influencers are upfront about being paid to endorse an asset.

“People have such intense parasocial bonds with the influencers that they follow that — even with that disclosure — I don't think it matters significantly because people will still just trust anything that they say.”

The problem with crypto endorsements

Giving out financial advice or promoting products is just another way for content creators to monetize their audiences, says Lorenz. While many promotions are above board, less scrupulous influencers can intentionally or unintentionally cross the line.

“They partner with financial crypto firms, or they release their own tokens in ‘pump and dump’ schemes,” she explains. “But all of these things are definitely a problem on the internet.”

Pump and dump schemes involve spreading misleading or overly positive information to inflate the price of a stock or security and then selling your shares at the higher price. The stock price typically drops afterwards and other investors may experience major losses.

The FTC found that 1-in-4 people who reported losing money to fraud last year said it started on social media, amounting to about $770 million in losses. People aged 18 to 39 were also more than twice as likely as older adults to report losing money to these scams.

And crypto fraud losses from January 2021 through March 2022 totalled over $1 billion.

Even when popular personalities aren’t intentionally participating in fraud, endorsing dubious assets over social media can still pose a risk.

Several traders accused Kardashian, Floyd Mayweather and basketball player Paul Pierce of participating in a pump and dump scheme with EthereumMax — however all three have filed motions to be removed from the lawsuit and EthereumMax has denied the allegations as well.

YouTuber Logan Paul also found himself in hot water last year after promoting a meme token called Dink Doink. The coin reportedly shot up in value by 40,000% after a tweet from Paul, and then plummeted by over 90% over the following two weeks. The New York Times reported that he failed to mention both financial and personal ties to the asset in his endorsements and later expressed regret for getting involved.

Lorenz believes there needs to be more guardrails in place to protect not just teens, but people of all ages from falling prey to online scams or dubious financial investments.

“The celebrities fundamentally don't seem to care,” says Lorenz. “The problem is it's their followers who are left holding the bag.”

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About the Author

Serah Louis

Serah Louis

Senior Staff Writer

Serah Louis is a senior staff writer with MoneyWise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.

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