Prominent asset manager and one of the first eleven Bitcoin spot exchange-traded fund (ETF) applicants, VanEck, finds itself in the regulatory spotlight as it agrees to settle charges brought forth by the US Securities and Exchange Commission (SEC) regarding violations related to the marketing of its social media-focused ETF.
SEC’s Crackdown On Undisclosed Arrangements
The SEC’s investigation is focused on VanEck’s launch of the VanEck Social Sentiment ETF (ticker symbol: BUZZ) in March 2021, which aimed to leverage positive insights from social media and other data sources. However, the regulatory agency uncovered undisclosed details surrounding the involvement of a well-known social media personality in promoting the ETF. While the SEC did not explicitly name the influencer, previous reports have linked David Portnoy, the founder of Barstool Sports, to the promotion of the VanEck ETF.
The SEC’s case is part of a wider crackdown on celebrities who promote or influence the price of financial products and cryptocurrencies. Portnoy used social media posts in interviews to endorse BUZZ, stating that he invested $2 million in the fund after its debut and promoting it on cable news on its launch day. However, VanEck failed to inform the board overseeing the ETF that Portnoy was being paid by BUZZ Indexes, a subsidiary of Toronto-based hedge fund Periscope Capital which was behind the index tracked by VanEck ETF.
VanEck Agrees To Settlement, Pays $1.75 Million
In response to the SEC’s findings, VanEck has agreed to pay a civil penalty of $1.75 million and accepted a cease and desist order, along with censure. However, the company neither admitted nor denied the SEC’s findings, maintaining a neutral stance on the matter.
VanEck Adjusts Offerings Amid Regulatory Challenges
This development comes on the heels of VanEck’s recent decision to terminate one of its ETF products, the Bitcoin Strategy ETF (ticker symbol: BITO), indicating a period of evaluation and adjustment within the company’s offerings, whilst enhancing the appeal of its newly approved spot Bitcoin ETF (ticker symbol: HODL), announcing a fee reduction by five basis points, from 0.25% to 0.20%, demonstrating efforts to navigate regulatory challenges while remaining competitive in the market.
