Celebrity Memecoin Frenzy on Solana Sparks SEC Scrutiny
The recent wave of celebrity-backed memecoins launched on Solana has triggered concerns about potential violations of securities laws. Legal experts warn that these ventures could attract the attention of the U.S. Securities and Exchange Commission (SEC) and expose both issuers and promoters to significant legal and financial risks.
Since late May, several prominent figures have entered the cryptocurrency space by launching and promoting their own memecoins on the Solana blockchain. These include celebrities like Caitlyn Jenner, Iggy Azalea (real name Amethyst Kelly), and Jason Derulo (real name Jason Desrouleaux).
Lawyers believe these memecoins might fall under the SEC’s regulatory purview. David Chung, founding director of Creo Legal, emphasizes that the SEC has a history of swift action against those who promote unregistered securities. He points to Caitlyn Jenner, the first celebrity to launch a memecoin, as a potential target for the SEC.
Liam Hennessy, a partner at Clyde & Co law firm, highlights the precedent set by Kim Kardashian’s fine for promoting EthereumMax (EMAX) without disclosing compensation. He suggests that the SEC considers “nearly all crypto tokens” to be securities, potentially requiring celebrity-issued tokens to be registered with the SEC to avoid hefty penalties.
While celebrities may not directly issue the tokens themselves, their association with the projects could still cause legal issues. Some celebrity-backed memecoins were launched on the platform pump.fun, allegedly with the involvement of Sahil Arora, a controversial figure linked to previous celebrity crypto promotions. Both Jenner and Derulo have publicly distanced themselves from Arora, accusing him of scamming them. However, legal experts warn that such attempts to distance themselves may not provide legal protection if the SEC deems the token offerings non-compliant.
Beyond the SEC, celebrities promoting these memecoins might face legal action from investors who experience significant losses. Memecoins are known for their inherent volatility and tendency to plummet in value. Chung anticipates the potential for class-action lawsuits from disgruntled investors, similar to those filed against other celebrities who promoted crypto ventures.
Lawyers advise celebrities to carefully consider the legal and reputational risks before associating themselves with such projects. The SEC’s focus on unregistered securities offerings and the potential for investor lawsuits make these ventures potentially perilous.
Despite reaching out to various parties involved, including the celebrities, their representatives, and the SEC, no response was received by the time of publication. This lack of transparency further underscores the potential concerns surrounding these celebrity memecoin launches.
