The U.S. Securities and Exchange Commission (SEC) has imposed a significant $1.75 million civil penalty on prominent investment adviser Van Eck Associates Corporation for failing to disclose an influencer’s role in the launch of a new exchange-traded fund (ETF).
The SEC revealed that during Van Eck’s 2021 launch of the VanEck Social Sentiment ETF, the investment firm did not fully disclose the involvement of a well-known social media personality in the marketing of the product, violating regulatory standards.
In their pursuit of leveraging social media to spur the fund’s growth, Van Eck engaged with a potent online personality, whose task was to amplify the fund’s allure.
The undisclosed fee structure offered to the influencer, tied to the fund’s growth, raised concerns about transparency and fair disclosure practices.
While the SEC refrained from naming the influencer directly, past reports linked David Portnoy, the founder of Barstool Sports, to the promotion of the Van Eck ETF.
The regulator criticized Van Eck’s omission to inform the ETF’s board about the influencer’s planned participation, stating it hindered the board’s oversight and evaluation of the advisory contract.
Van Eck consented to the SEC’s order, admitting to violating the Investment Company Act and Investment Advisers Act, agreeing to a cease-and-desist order, censure, and the monetary penalty.
The penalty follows Van Eck’s decision to dissolve its Bitcoin Strategy ETF and lower fees for its dedicated Bitcoin ETF amid projections for the crypto market in 2024, anticipating Bitcoin to reach unprecedented highs by year-end and Ethereum to outperform leading tech equities.
