Influencers have become a major economic force. They can pull in tens of millions of dollars a year while running whole companies dedicated to supporting their efforts. And they’re under pressure to put out increasingly click-worthy content. Anyone in the compliance industry knows that with high pressure and big money comes risk.
Influencers are typically social media stars that have amassed huge followings. For example, Mr. Beast has over 125 million subscribers on just one of his YouTube channels.
They are called “influencers” because they are perceived to have the power to influence their audience’s behavior or purchasing decisions.
There is a precedent for influencers to fall on the wrong side of white-collar violations.
Kim Kardashian agreed last October to pay the SEC $1.26 million to settle charges of promoting cryptocurrency to her Instagram followers without disclosing that she was paid for the promotion. Kardashian wasn’t the first influencer to settle charges related to securities laws, but she perhaps has been the most high-profile to date.
In December, the DOJ and SEC charged eight social media stock market influencers who allegedly used their army of Twitter and Discord followers to manipulate stocks, generating profits of over $100 million in two years. The alleged pump-and-dump scheme was nothing new. But the way these “stock bros” allegedly manipulated the market through coordinated social media actions, and the scale of their alleged scheme, was new.
Like Kardashian, most major influencers aren’t individuals operating in isolation. They are the face of a commercial enterprise. Kardashian has Skims, Mr. Beast has BeastBurger, Logan Paul has Prime, and even the Pasta Queen has a line of cookware. The list goes on and on. And the more views a video gets, the more burgers Mr. Beast will sell.
Another risk factor to consider is that most influencers are young. Some start their careers in high school and never attend college or got an advanced degree. Going to university isn’t a necessity, but running a multi-million dollar international business is complicated. Without certain knowledge of business law — the FCPA, for example — a few ill-informed or bad decisions could ramp up into something worse.
No industry is immune from the FCPA, and the U.S. government doesn’t just prosecute mega-corporations. In 2020, three women were charged with FCPA anti-bribery offenses resulting from an international adoption scam.
So, will we see the first influencer-related FCPA case in 2023? Stay tuned.