Following ex-NOC Ryan Tan, can crypto influencers use social media to drive coin sales?

Earlier this year, TechInAsia published an exposé on Ryan Tan, an influencer and co-founder of his former company Night Owl Cinematics.

In it, the journalist included screenshots of Ryan’s posts on his instagram account, on top of his own sharing of comments from Ryan after the journalist criticised the influencer for not having enough knowledge on the crypto space to shill coins to followers.

To recap what happened, Ryan shilled coins that crashed soon after the posts, and denied responsibility for his followers’ losses.

The jury is still out on whether Ryan was in the wrong for influencing his followers that way. A crypto investor that I reached out to on the issue reasoned that Ryan may not be fully in the wrong – the incident could have just been a case of bad luck. 

Ryan was, after all, shilling the coins about two weeks before a general crash in crypto prices, and the coins he shilled were within the blast radius, said the investor, who did not wish to be named.

However, according to our source, an analysis of the blockchain seems to suggest that Ryan was selling the very coins that he was shilling, though it’s possible that he was cashing out temporarily in order to reinvest.

Arguing over whether Ryan’s actions were right or wrong, or if he should bear any liability for his followers’ losses, brings us to the bigger question at hand: Ryan is one of many influencers who openly talk about crypto investments. Should the spotlight then be on crypto influencers in general and how there needs to be some form of checks and balances on these actors?

The bigger picture

Let’s first examine the effects of crypto influencers, and what they do.

In general, crypto influencers drum up support for cryptocurrencies through social media. In Singapore, cryptocurrency platforms are regulated and they cannot promote their cryptocurrencies through influencers or other media platforms. 

In a response to our queries on the responsibility of influencers promoting cryptocurrencies, a Monetary Authority of Singapore spokesperson stated: “Digital Payment Token (DPT) service providers should not portray the trading of DPTs in a manner that trivialises the high risks of trading in DPTs, and should not promote their DPT services in public areas in Singapore or through any other media directed at the general public in the country.”

“In addition, DPT service providers should also not engage third parties, such as social media influencers or third-party websites, to promote their DPT services to the general public in Singapore. This includes sponsored content or commissioned articles by third parties that may directly or indirectly encourage the trading of DPTs.”

Clearly, the government views DPTs, including cryptocurrencies, as volatile and risky investments for the general public. 

This view in itself is not without reason. Even stable cryptocurrencies (known as stablecoins) can experience fluctuations in their values of up to 30 per cent, and for less stable cryptocurrencies like the ones that Ryan shilled, the volatility is even higher. While this means that buying these currencies can net huge profits, it also comes with high risk and the possibility of losing your entire investment and hard-earned money. 

So what crypto influencers are promoting is inherently controversial – the markets are unpredictable, and encouraging someone to buy a certain cryptocurrency only to have that cryptocurrency lose all its value in the next moment will have disastrous effects on those who blindly follow the advice from these “experts”.

The disclaimer that influencers state that what they are offering are “non financial advice” but “personal opinions” seems to be cold comfort to those who have lost their money.

The TechInAsia article had a comment from Jerrold Soh, Deputy Director of the Singapore Management University Center for Computational Law which should be food for thought: “There is a basic and logical principle that laws which apply offline should, in the absence of special justifications, apply equally online. In the real world, if one carelessly or recklessly advises another to make disastrous investments, one could be liable to compensate them for any resultant loss under our system of tort law.”

From a legal standpoint, crypto influencers can be liable for losses from their followers, and some might argue that this is justified. Social media influencers have an outsized influence – their words carry more weight because of their authority, whether if it is perceived or real.

There is a reason why companies hire influencers. Marketers for example, rely on influencers to get the word out on their products. 

Then again, in a reverse scenario – if crypto influencers shill coins that rise, and followers make money from these investments – what happens then? Certainly no one will voluntarily hand over these earnings to the influencer for no reason as it was a DYOD or “Do Your Own Due Diligence” situation.

If crypto influencers are not earning from shilling coins, should they then be liable for their followers’ losses? 

Punishing negligence and bad actors

We all know that to be an influencer, it is optional to have high educational qualifications – which can often be a soft gauge to see if a person understands the technical knowledge that cryptocurrencies require. Anyone with a large following can transition from being an influencer to a crypto influencer, despite the fact that the crypto world to a layman is technical and difficult to understand. 

When influencers make this switch, the clout that they have on one topic transfers to the other through their charismatic authority. At the same time, there’s no obligation for the influencer to disclose their level of experience or the research that they do. As we have seen for some crypto influencers, this can be problematic.

While influencers may not have a duty to compensate followers, we need to call them out on their responsibility as public figures. For those who have integrity, they have to try to shield followers from bad investments and ensure that their content is well researched and caveats well disclosed.

A crypto influencer who preferred not to be named told Vulcan Post: “Personally my checklist is to only talk about popular cryptocurrencies and to show facts like the community size, news articles, and reddit trends. I also explain all the risks, instead of just saying that it’s ‘not financial advice’, and give reasons for my predictions.”

These checks help to shed clarity on the risks involved, instead of just promising “easy money”. Asymmetric information should not be used by anyone, influencers included, to make profit at the expense of others.

But these disclosures should not exempt followers from DYOD (doing their own research). The crypto space is large, and still relatively new. No amount of disclosures and governance can substitute individual caution. The words of influencers are most certainly not the gospel, and should not be treated as such. 

As another influencer who wanted to be unnamed puts it: “Explaining the risks is expected but not compulsory, so followers should be aware by doing their own research, first and foremost.”

Crypto influencers- a class of their own?

Some may also argue that crypto influencers, at least in Singapore, are fundamentally different from other types of influencers.

For one, due to strict regulations, crypto influencers in Singapore are not paid by DPT platforms to promote cryptocurrencies. They are in effect, self-employed content creators that cannot be sponsored. So their revenue comes from content creation, like ad traffic revenues. They wouldn’t want to lose their followers by drawing them into ponzi schemes.

Additionally, crypto influencers are staking their reputation when they shill coins on their personal accounts. The damage to their image, as happened with Ryan, should not be underestimated. Trust is difficult to earn back when lost.

Crypto influencers can have the potential to do real good if they give reliable and worthy projects the traction they need to take off.

As a suggestion, Singapore can consider setting compulsory guidelines for these crypto influencers to adhere to, to protect all parties. 

Crypto influencers have the power to do good, but we cannot ignore the potential for abuse if they are given free reign in everything they say. There is a real risk of influencers misusing their clout and shilling coins they know are bad bets, in exchange for a quick buck.

Changes must be made in the crypto influencer industry.

Right now there are pressing issues yet to be addressed on this, and incentive structures needs to be fixed. While this ‘Crypto King’ episode may have died down, leaving things as it is means the potential for similar reruns.

As Oscar Wilde puts it clearly: “To err once is human, to err twice is careless”.

Featured Image Credit: Irene Zhao / Ryan Tan / LetKnow News