The cryptocurrency market is experiencing rapid development, and the influence of celebrities is becoming increasingly significant in this process. Recently, the WLF project, supported by the Trump family, has once again attracted widespread attention and heated discussion in the market. However, despite the celebrity effect bringing excitement to the market, it has also given rise to a series of legal issues. First, there is currently no consensus internationally on the legal nature of cryptocurrencies. In different countries, cryptocurrencies are viewed as commodities, property, currency, or payment tools, and this inconsistency in definitions poses potential risks. For example, in the United States, the Securities and Exchange Commission (SEC) classifies most cryptocurrencies as securities, but a federal judge ruled that the Commodity Futures Trading Commission (CFTC) has the authority to regulate Bitcoin and other cryptocurrencies as commodities. The Internal Revenue Service (IRS) has treated cryptocurrencies as taxable property since March 2014, while the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN) regard them as currency. These different classifications create confusion and complexity regarding the legal status of cryptocurrencies. Globally, countries also differ in their definitions of cryptocurrencies. Europe is at the forefront of legalizing cryptocurrencies, but even among European countries, definitions vary. North Macedonia is the only European country that has declared cryptocurrencies illegal, while Moldova's position remains unclear. In the Americas, Bolivia is the only country that considers cryptocurrencies illegal, while Guatemala, Guyana, Haiti, Nicaragua, Paraguay, and Uruguay have yet to clarify their official stance. In Africa and Asia, the degree of cryptocurrency legalization varies widely; only 38.6% of African countries recognize the legality of cryptocurrencies, while 77.7% of Asian countries have formally recognized cryptocurrencies.

I. Legal Risks of Celebrity Token Issuance

Background of the Trump Family and the WLF Project: Trump revealed the establishment of WLF on social media, with family members playing important roles in the project. On the evening of September 16, Eastern Time, Trump announced the establishment of WLF on social media X. WLF is a decentralized finance project supported by the Trump family, aiming to become a cryptocurrency banking platform and launch the WLFI token. Trump is referred to as the "Chief Cryptocurrency Advocate," while his son Barron Trump is listed as a "DeFi Visionary," and Eric Trump and Donald Trump Jr. are called "Web3 Ambassadors." Legal Analysis: The support from the Trump family has brought significant attention to the WLF project, but it has also raised questions about the project's legality. From the perspective of securities law, if the tokens of the WLF project are deemed securities, the issuance and sale of the project may need to comply with relevant securities regulations, but is this actually the case? The Kardashian Family and the Jenner Token Incident: At the end of May this year, Caitlyn Jenner, the stepfather of the Kardashian sisters, shared a photo of himself shaking hands with Trump on his X account, along with a link to the Jenner token. Once launched, the token experienced extreme price fluctuations in a short time. Within half an hour of its launch, the Jenner token surged 15 times, and after an hour, it increased by 70 times. However, an hour later, developers sold tokens worth 160 SOL in the liquidity pool, causing the price to plummet. Subsequently, Caitlyn Jenner verified through Instagram and Twitter, leading community members to buy in large quantities, and the token skyrocketed by 610% within 30 minutes. But soon, due to deepfake concerns, the token plummeted over 60% in 10 minutes. Later, broker Sophia held a Space meeting through Caitlyn's account, pushing the token's market value from $4 million to $20 million. However, as Sophia hinted at the possibility of launching a new token during the Space, community members began to sell off, causing the Jenner token to drop nearly 70% again within half an hour. At 8:20 AM, Caitlyn Jenner's Twitter account posted a real-life video denying the deepfake allegations, leading to a significant price increase. On May 38 at 2 AM, Caitlyn Jenner unexpectedly announced a new Pump token BBARK, and after the news broke, JENNER plummeted from $0.027 to $0.011, after which Caitlyn urgently deleted the tweet and later updated it with an advertisement label, claiming it was a promotion for other tokens. Legal Risks: Caitlyn Jenner's token issuance behavior may face the risk of violating securities laws. Although the Kardashians openly admitted to being the issuers and marketers of the token, the market's reaction to their behavior has made many MEME tokens themselves difficult to escape the suspicion of being securities. The SEC has been cracking down on KOL marketing of cryptocurrency projects in recent years; Kim Kardashian was charged by the SEC for illegally promoting a crypto security and agreed to pay $1.26 million to settle. She promoted a crypto security offered and sold by the EthereumMax platform without disclosing the $250,000 payment she received for the promotion. In a speech at the Cambridge International Economic Crime Conference, FCA Chairman Randall discussed the "risks of token regulation" and "rules to protect people from investment fraud and scams." This indicates that the Kardashian family's actions in the cryptocurrency field are under strict regulatory scrutiny, and their token issuance behavior carries significant legal risks. Elon Musk and Dogecoin Specific Incident: On June 16, 2022, investor Keith Johnson filed a lawsuit against Elon Musk and his companies Tesla and SpaceX, seeking damages of up to $258 billion. Johnson claimed that Musk promoted the cryptocurrency Dogecoin, implementing a pyramid scheme that caused him economic losses. He described himself as "an American citizen who suffered economic losses from investing in Dogecoin" and accused Musk and his companies of constituting an organized crime group engaged in illegal activities aimed at artificially inflating the value of Dogecoin. Dogecoin peaked at $0.722 on May 7, 2021, while the trading price around noon on June 16, 2022, was approximately $0.056. Johnson filed the lawsuit on behalf of all investors who suffered losses from investing in Dogecoin since April 2019, seeking $86 billion in "compensatory damages" and $172 billion in "punitive damages" as punishment for the defendants and to prevent them from committing similar acts in the future. The lawsuit also sought to prohibit Musk and his companies from promoting Dogecoin. Musk was accused of deliberately implementing a "cryptocurrency pyramid scheme" on Twitter, directly manipulating the price of Dogecoin. The plaintiff claimed that Musk and his companies artificially inflated the price of Dogecoin through extensive promotion and sales, which subsequently led to a price crash, thereby gaining improper benefits. Over the past two years, such lawsuits have continued, with the complaints being amended multiple times and new accusations added. However, on August 31, 2024, U.S. District Judge Alvin Hellerstein dismissed the lawsuit against Musk and Tesla, ruling "no further lawsuits" on the matter, indicating that the plaintiff could not file another lawsuit regarding this issue. Legal Risk Analysis: Musk is facing multiple legal lawsuits for allegedly manipulating the price of Dogecoin and insider trading. Investors have filed claims seeking damages ranging from billions to $258 billion. However, to date, Musk has not faced any substantial legal sanctions. Throughout the litigation process, Musk's legal advisors have worked diligently to dismiss the relevant accusations, insisting that these claims are baseless. Although in August 2024, the U.S. District Court for the Southern District of New York ultimately ruled to dismiss these lawsuits, the entire process has been lengthy and consumed significant legal resources. The lawsuits against Musk for allegedly manipulating the price of Dogecoin have had impacts on multiple levels. Some believe Musk's actions constitute market manipulation; legally, such lawsuits have triggered prolonged legal battles, placing a heavy legal burden on Musk. In market terms, Musk's public statements about Dogecoin have led to frequent price fluctuations of the cryptocurrency. In response to the legal lawsuits related to Dogecoin, Musk and his legal team have adopted proactive strategies. On one hand, Musk's lawyers argue that the investors' class action lawsuit is based on misunderstandings stemming from Musk's "harmless tweets" about Dogecoin; on the other hand, Musk continues to express his support for Dogecoin in various settings and actively responds to the lawsuits through legal means. From a legal perspective, the likelihood of investors achieving compensation is relatively low. Currently, there is a lack of sufficient evidence to support the investors' claims, and throughout the litigation process, investors have faced numerous challenges, while Musk and his legal advisors have mounted a strong defense. This situation highlights the significant difficulties investors face in protecting their rights, while also warning us to demystify the influence of celebrities in the cryptocurrency field.

II. Legal Risks of Celebrity Cryptocurrency Issuance

(1) Applicability of Securities Law

Howey Test: The Howey Test is a key criterion for determining whether a cryptocurrency project constitutes a security, consisting of four elements: investment of money, common enterprise, expectation of profits, reliance on the efforts of others. If a cryptocurrency project meets these elements, it may be classified as a security and must comply with relevant securities laws. For example, in lawsuits initiated by the SEC, many projects have been deemed securities offerings due to meeting the elements of the Howey Test. If these elements are not met, the project may face serious legal consequences. For instance, Sun Yuchen was sued by the SEC for promoting his cryptocurrency project through market manipulation and fraud, which the SEC deemed a violation of securities laws. Sun Yuchen was accused of distributing billions of crypto assets known as Tronix (TRX) and BitTorrent (BTT) since August 2017 and artificially manipulating the trading volume of these assets. The SEC pointed out that Sun Yuchen artificially inflated the trading volume of TRX through a large number of false transactions, including simultaneous or nearly simultaneous buying and selling, without actually changing the ownership of the assets. At least from April 2018 to February 2019, Sun Yuchen ordered employees to conduct over 600,000 "left-hand to right-hand" transactions between two accounts he controlled. By creating a false and misleading appearance of legitimate trading, Sun Yuchen was able to maintain the price stability of TRX while more easily selling TRX in the secondary market, earning approximately $31 million from the illegal, unregistered issuance and sale of TRX. Similar Cases: In addition to Sun Yuchen's case, there are many similar situations. For example, the SEC sued Jonathan William Mikula for promoting securities of four companies without disclosing compensation information. Mikula recommended in a newsletter from an investment firm where he served as an author and chief analyst, presenting an appearance of being unbiased and not compensated, while in reality, he received compensation in cash and luxury goods. The SEC filed a lawsuit seeking to impose market bans, behavioral prohibitions, restitution, fines, etc., against Mikula. These cases convey a message that the issuance of virtual currencies by celebrities, if not in compliance with securities laws, may face serious legal consequences, including fines, market bans, and restitution of illegal gains. (2) Investor Protection 1. Information Disclosure Obligations: Celebrities promoting and marketing cryptocurrency projects should fulfill their information disclosure obligations, providing investors with sufficient information about the risks and returns of the project. According to the procedures for securities issuance, issuers must provide detailed issuance documents to investors, including prospectuses, issuance announcements, etc., to help investors understand the issuer's basic situation, issuance purpose, use of funds, risk factors, etc. Celebrities should also bear similar obligations when promoting cryptocurrency projects. If celebrities fail to fulfill their information disclosure obligations, they may mislead investors, leading to investor losses. 2. Fraud Liability: If celebrities engage in fraudulent behavior during the issuance of virtual currencies, such as false advertising or market manipulation, they will bear corresponding fraud liability. Investors can pursue legal action against celebrities to protect their legitimate rights and interests. For example, in the case of Sichuang Medical, the listed company inflated profits by over 100 million yuan through false business practices conducted by its subsidiaries over two years, constituting fraudulent issuance. The Shenzhen Stock Exchange imposed the maximum penalties on the "key minority" involved in the fraudulent issuance, publicly recognizing the then-chairman and general manager Zhang Lizhong as unsuitable to serve as a director, supervisor, or senior executive of a listed company for ten years, and publicly reprimanding Zhang Lizhong, Wang Lin, Sun Xinjun, and Wang Jun. In the cryptocurrency field, if celebrities engage in fraudulent behavior, investors can also pursue civil litigation, such as suing the ICO company and the celebrities endorsing it, and if criminal offenses are involved, they should report to the authorities for criminal prosecution. At the same time, as "gatekeepers" of the capital market, intermediary institutions are often held accountable in fraudulent issuance cases. In cryptocurrency projects, if intermediary institutions fail to fulfill their responsibilities, they may also be held liable.

III. Regulatory Status and Challenges

(1) Regulatory Actions of the U.S. Securities and Exchange Commission

The U.S. Securities and Exchange Commission (SEC) has been continuously cracking down on KOL marketing of cryptocurrency projects, imposing fines on several celebrities, including Kim Kardashian, Floyd Mayweather, and Lindsay Lohan, to protect investor interests. These celebrities failed to adequately fulfill their information disclosure obligations when promoting cryptocurrency projects, misleading investors. The SEC's actions demonstrate its strict regulatory stance on KOL marketing behavior in the cryptocurrency field. However, the rapid development and innovation of the cryptocurrency market pose significant challenges for the SEC's regulatory work. On one hand, the continuous updates in cryptocurrency technology and the emergence of new projects and trading methods require the SEC to constantly learn and adapt to these changes to ensure the effectiveness of regulatory measures. On the other hand, the global nature of the cryptocurrency market increases the difficulty of regulation. Due to differing regulatory policies on cryptocurrencies in different countries, coupled with the frequent occurrence of cross-border transactions, the SEC faces numerous challenges in regulation. Regulatory Challenges: The rapid development and innovation of the cryptocurrency market pose significant challenges for the SEC's regulatory work. Regulatory agencies must continuously adapt to market changes and strengthen their regulatory efforts in the cryptocurrency field to protect investors' legitimate rights and interests. First, the complexity of cryptocurrency technology is a major challenge for regulation. As the underlying technology of cryptocurrencies, blockchain technology's decentralized and anonymous characteristics make it difficult for regulatory agencies to track transactions and confirm participants' identities. For example, in certain cryptocurrency transactions, both parties may conduct transactions through anonymous wallets, making it difficult for regulatory agencies to determine the true intent of the transaction and the identities of the participants. Secondly, the global nature of the cryptocurrency market also presents significant difficulties for regulation. Different countries have varying regulatory policies on cryptocurrencies, and the frequent occurrence of cross-border transactions makes it challenging for regulatory agencies to coordinate unified regulatory standards. For instance, some countries impose strict regulatory measures on cryptocurrencies, prohibiting or restricting their trading, while others adopt more lenient regulatory policies, encouraging innovation and development in cryptocurrencies. This disparity in regulatory policies creates opportunities for regulatory arbitrage in the cryptocurrency market and poses certain risks to global financial stability. Finally, the rapid pace of innovation in the cryptocurrency market, with the continuous emergence of new projects and trading methods, also poses significant challenges for regulatory agencies. Regulatory agencies need to continuously learn and adapt to these changes to ensure the effectiveness of regulation. For example, the rise of decentralized finance (DeFi) projects in recent years has posed significant challenges to traditional financial regulatory models. DeFi projects achieve automation and decentralization of financial transactions through smart contracts, eliminating the need for traditional financial institutions to intervene, making it difficult for regulatory agencies to effectively regulate them.

IV. Future Outlook

In the field of cryptocurrency, the influence of celebrities indeed injects vitality into the market, but it also gives rise to many complex legal issues. The behavior of celebrities issuing digital currencies may violate securities regulations, which not only poses potential legal risks for celebrities but also brings significant uncertainty for investors. Therefore, Xiao An once again reminds everyone to remain vigilant and carefully assess the legality and potential risks of cryptocurrency projects recommended by celebrities. In summary, the legal issues arising from the celebrity effect in the cryptocurrency field require heightened attention from all sectors. We hope that celebrities, investors, and regulatory agencies can each fulfill their roles to jointly promote the legalization and standardization of the cryptocurrency market. We look forward to cryptocurrencies fully demonstrating their innovative potential in the future, making positive contributions to economic growth and the healthy development of the financial system.