The “Golden Age of Grift”: Hasan Minhaj Highlights Financial Fraud Trends on The Daily Show

“From the moment you wake up and you pull out your phone, these grifters have root access to your brain. And it’s never been easier for total idiots to pass themselves off as stock market gurus to millions of people.” (6:00)

On the March 2, 2023, episode of The Daily Show, comedian Hasan Minhaj said what we all know to be true: social media creates new avenues for fraudsters to exploit their visibility, manipulate investors, and defraud the financial markets. As he notes, “This is why there needs to be consequences, and the good news is, there can be…” (11:21) In true Comedy Central form,[1] Minhaj advocated reporting fraud to the U.S. Securities and Exchange Commission (SEC). (11:32)

Two trends—expanded social media use and new cryptocurrency investments—have led to a broad reach for financial fraud. For example, one Twitter user described the consequences of a “pump and dump” scheme:

“Shame on me. I use to defend these guys (all of them) thinking they were going to help me pay off my wife’s medical bills after her fighting breast cancer. I know I’m the one that clicked the buy button but damn I lost a ton of money following their trades.” (10:58)

This individual was scammed as part of an alleged $100 million securities fraud scheme taking place in the public domains of Twitter and stock trading chatrooms on Discord. In December 2022, the SEC brought charges against eight people alleging the defendants exploited their “large [social media] following of novice investors” by touting certain stocks they had recently acquired and encouraging their followers to invest in the same stocks. But the SEC alleged, “when share prices and/or trading volumes rose in the promoted securities, the individuals regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them,” resulting in significant profits to the defendants and losses to investors.

The SEC has brought high profile charges against celebrities and influencers for misusing their positions of power to the detriment of investors. For example, in October 2021, the SEC brought charges against billionaire media persona Kim Kardashian for publishing an Instagram post about a crypto asset security offered and sold by EthereumMax without disclosing that she received $250,000 in exchange. Kardashian agreed to settle the charges, paying $1.26 million in penalties, disgorgement, and interest. Most recently, the SEC brought charges against Justin Sun, founder of Tronix crypto assets, as well as his celebrity backers, Jake Paul, Soulja Boy, and Lindsay Lohan. The SEC alleged that Sun engaged in fraud by manipulating the trading activity of the two tokens, creating the appearance of active trading when it did not exist, and that his celebrity backers failed to disclose the remuneration paid in exchange for their promotion of the assets.

Chainalysis estimated that buyers of cryptocurrency tokens spent $4.6 billion in 2022 to acquire tokens at the center of suspected pump and dump schemes. In turn, the individuals driving the pump and dump schemes made tens of millions of dollars in fraudulent profits by selling their tokens while the prices were high. As always, the lure of significant profits can outweigh the risk to fraudsters that they may be held accountable.

Social media and crypto currency continue to expand the reach of fraudsters. 31% of U.S. adults aged 18 to 29 have invested in, used, or traded crypto. As these crypto investments increase, so too does cryptocurrency fraud. Chainalysis conservatively estimated that crypto scams have defrauded investors of approximately $37.4 billion between 2017 and 2022, most often through promoting fake investment companies. Chainalysis also estimated that all illicit cryptocurrency transactions, including activity associated with sanctioned entities, money laundering, scams, and pump and dump schemes, “hit[] an all-time high of $20.6 billion” in 2022.

On The Daily Show, Hasan Minhaj discussed a recent example of major financial fraud by FTX Trading Ltd. (FTX), which followed this new pattern. Cryptocurrency exchange FTX partnered with celebrities like Tom Brady, Steph Curry, and Shaquille O’Neil to promote itself and have investors buy into it, before it imploded and lost $8 billion of investor funds.

Television personality Kevin O’Leary, who became a household name through his roles on ABC’s Shark Tank and CNBC’s Money Court, also helped to put the now-bankrupt FTX on the map through publicly endorsing the cryptocurrency exchange. FTX paid O’Leary more than $50 million as a spokesperson, according to O’Leary’s December 2022 Congressional testimony (2:08). When FTX imploded, O’Leary also lost $18 million of personal investments (1:17) (but presumably not the spokes fees).

He rationalized this loss as a normal side-effect of capitalism. (8:16) With a net worth of hundreds of millions of dollars, O’Leary stated, “I can go to sleep every night knowing it was my money, I lost it, I ate it, shame on me. It doesn’t change what I do in the morning. I’m a very fortunate guy, I can take huge hits and I move on and keep going.” (10:40-10:52)

Sure, anyone can lose money through bad investments. As O’Leary notes, that can be expected, to a certain extent. And for some celebrities who are paid spokespeople, even losses involved in a fraud scheme as big as FTX may merely reflect something they can accept as the cost of doing business.  But most investors are not in that position.

Fraud is not just bad investment advice. That’s why there is an SEC whistleblower program and why FTX management is facing prosecution today. This is why whistleblowers who can provide information to the SEC and expose these activities are important.

The SEC is continuing to ramp up its enforcement efforts by rewarding whistleblowers who bring information to the SEC’s attention and improving its whistleblower program. In an era of increasing publicity and social media use, it is important to heed Hasan Minhaj’s call to action.: Report legitimate concerns to the SEC. Whistleblowers can play a role in thwarting financial fraud before more Americans are harmed and be rewarded in the process.

Jaclyn Tayabji is a Fellow at Tycko & Zavareei LLP

[1] Minhaj uses language to describe this process TAF would not, but he gets his point across!