Can Influencers Be Charged for Promoting Unregulated Crypto Products?

Charging influencers for promoting unregulated cryptocurrency products raises several important legal implications, especially as the regulatory landscape around cryptocurrencies remains unclear in many jurisdictions, including India.

Key Legal Implications

• Consumer Protection Laws: Influencers can be held accountable under consumer protection laws if their promotions mislead the public. In India, under the Consumer Protection Act, 2019, misleading endorsements can result in penalties, including fines and imprisonment. The law requires influencers to disclose paid promotions and ensure that their endorsements are truthful and not deceptive.
• Advertising Guidelines: Influencers are expected to comply with advertising regulations set by bodies such as the Advertising Standards Council of India (ASCI). If they promote unregulated crypto products without proper disclosures or provide misleading information, they may face legal consequences. ASCI’s guidelines also require disclaimers when endorsing financial products like cryptocurrencies.
• Potential Fraud Charges: If the promoted crypto product turns out to be fraudulent, influencers could be charged with facilitating fraud under the Indian Penal Code (IPC), particularly under sections related to cheating and dishonesty. If an influencer knowingly promotes a scam, they may be criminally liable for endorsing a fraudulent scheme.
• Securities and Exchange Board of India (SEBI) Regulations: If the crypto product being promoted is classified as a financial instrument or security, influencers may also fall under the scrutiny of SEBI, which regulates investment-related promotions. Promoting unregulated financial products without the necessary permissions could lead to legal action.
• Tax Evasion Concerns: Influencers paid in cryptocurrencies for endorsements must ensure that they disclose such income in their tax filings. Failure to do so could result in penalties from the Income Tax Department.

Defenses and Mitigation

• Lack of Knowledge: Influencers could claim they were unaware that the product was unregulated or fraudulent, but this defense may not absolve them if due diligence was not performed.
• Disclaimers: Using appropriate disclaimers, such as advising users to do their own research, may mitigate legal risks but might not provide full protection against liability.

Summary

Influencers promoting unregulated cryptocurrency products may face legal consequences under consumer protection laws, advertising guidelines, and potential fraud charges. As the crypto market is unregulated in many regions, including India, influencers should exercise caution, perform due diligence, and disclose promotions transparently to avoid legal repercussions.