Inception of ETF launch highlights the crucial involvement of renowned influencer

Prominent investment adviser, Van Eck Associates Corporation, has been hit with a substantial $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 well-known social media personality in the marketing of its new exchange-traded fund (ETF), the VanEck Social Sentiment ETF. The fund was designed to track an index that gathered “positive insights” from social media and other data sources. However, the SEC discovered that Van Eck had engaged with a powerful online personality to enhance the fund’s appeal, without disclosing the fee structure offered to the influencer. The arrangement involved increasing the influencer’s compensation as the fund grew. Although the SEC did not name the influencer directly, reports from 2021 have linked David Portnoy, the founder of Barstool Sports, to the promotion of the Van Eck ETF. The SEC criticized Van Eck for failing to inform the ETF’s board about the influencer’s participation, which had significant implications for the management contract and the fund’s operations. Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, highlighted the importance of transparency from advisers, stating that the failure to provide accurate disclosures hindered the board’s ability to assess the advisory contract and understand the economic impact of licensing agreements. Van Eck has agreed to the SEC’s order, accepting its violation of the Investment Company Act and Investment Advisers Act. The company has also consented to a cease-and-desist order, censure, and a monetary penalty. This news follows Van Eck’s recent announcement to dissolve its Bitcoin Strategy ETF due to poor performance. In an effort to boost the popularity of its dedicated Bitcoin ETF, Van Eck announced a reduction in fees from 0.25% to 0.20%. The firm has also shared projections for the crypto market in 2024, predicting that Bitcoin will reach unprecedented highs towards the end of that year. Van Eck does not anticipate Ethereum surpassing Bitcoin but expects it to outperform leading tech equities. Additionally, the company foresees a reshuffling among cryptocurrency exchanges, suggesting that rivals like Coinbase could overtake Binance in terms of trading volume.