- VanEck had failed to disclose key details about an influencer campaign used to promote one of its ETFs.
- The influencer had been on a performance-based contract, compensated based on the ETF’s growth.
- The SEC fine came after VanEck shut down another ETF due to poor performance.
Investment firm VanEck found itself on the wrong side of the Securities and Exchange Commission (SEC) this week, agreeing to pay a $1.75 million fine to settle charges related to its social media-focused exchange-traded fund (ETF) launch in 2021.
The SEC took issue with VanEck’s failure to disclose key details about the influencer campaign used to promote the fund, raising concerns about transparency and potential conflicts of interest.
VanEck ETF Exposed?
The VanEck Social Sentiment ETF, launched in March 2021, tracked an index based on “positive insights” gleaned from social media and other data sources. However, the SEC investigation revealed that VanEck sought to amplify the fund’s appeal by collaborating with a prominent and somewhat controversial social media personality.
Sponsored
While the SEC refrained from naming the influencer, media reports have linked David Portnoy, founder of Barstool Sports, to the campaign. Crucially, the undisclosed compensation for this influencer was directly tied to the ETF’s growth, meaning they stood to gain financially as the fund attracted more assets.
According to the SEC, this arrangement was never presented to the ETF’s board for approval, a significant oversight given its potential impact on management fees and overall fund operations.
“Failing to provide accurate disclosures to the board hinders their ability to properly assess the advisory contract and understand the economic impact of licensing agreements,” stated Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, emphasizing the importance of transparency.
VanEck Lowers Fees on Spot Bitcoin ETF
VanEck, without admitting or denying the SEC’s findings, agreed to a cease-and-desist order, a censure, and the financial penalty. This incident comes on the heels of another VanEck ETF, the Bitcoin Strategy ETF, being shuttered due to lackluster performance.
Sponsored
Notably, the firm recently reduced fees on its dedicated spot Bitcoin ETF in an apparent attempt to attract more investors amidst a volatile cryptocurrency market. The SEC’s action serves as a reminder to financial institutions about the importance of complete and transparent disclosure, particularly when influencers and performance-based compensation are involved.
On the Flipside
- The influencer’s fee is tied to the fund’s growth, creating a potential conflict of interest, as they would be incentivized to promote the fund regardless of its merits.
- The SEC’s penalty focuses on disclosure failures, not the underlying investment strategy.
Why This Matters
This SEC fine against VanEck highlights the crucial role of transparency in crypto marketing, especially when influencers and performance-based incentives are involved. The incident raises concerns about potential conflicts of interest and underscores the need for clear disclosures to protect investors in a rapidly evolving market.
Curious about how Coinbase became the primary custodian for Bitcoin ETFs? And what are their plans for the future? Read here:
Coinbase Played a “Key Role” in ETF Approvals, CEO States
Wondering if the Ether ETF will be approved by May? And what the potential impact on the crypto market could be? Find out here:
Ether ETFs Could Be Approved by May, Experts Predict
