Role of an influencer in launching an ETF

Van Eck Associates Corporation, a well-known investment adviser, has been hit with a significant $1.75 million civil penalty by the U.S. Securities and Exchange Commission (SEC). The SEC revealed in a statement on February 16 that Van Eck failed to fully disclose the involvement of a prominent social media figure in the marketing of its new exchange-traded fund (ETF), the VanEck Social Sentiment ETF. The ETF was designed to track an index that utilized positive insights from social media and other data sources. However, the SEC discovered that Van Eck had partnered with a polarizing online personality to amplify the fund’s appeal, and the influencer’s compensation was tied to the fund’s growth. The SEC criticized Van Eck for not informing the ETF’s board about this arrangement, which had significant implications for the management contract and the fund’s operations. The SEC emphasized the importance of transparency from advisers and stated that the failure to disclose accurate information hinders the board’s ability to evaluate contracts and consider the economic impact of licensing agreements. Van Eck has agreed to the SEC’s order, admitting to violating the Investment Company Act and Investment Advisers Act, and has also agreed to a cease-and-desist order, censure, and the monetary penalty. This news comes shortly after Van Eck announced the dissolution of its Bitcoin Strategy ETF and a fee reduction for its dedicated Bitcoin ETF. The investment firm has also shared projections for the crypto market, including a belief that Bitcoin will reach new highs by the end of 2024 and that Ethereum will outperform leading tech equities. Additionally, Van Eck anticipates a reshuffling among cryptocurrency exchanges, with rivals potentially overtaking Binance’s top spot by volume. Bitcoin ETFs have also seen net inflows for two consecutive weeks, totaling $4.7 billion.