SEC Penalizes Van Eck Over Influencer Marketing Missteps

Van Eck Associates Corporation has faced a $1.75 million fine from the U.S. Securities and Exchange Commission (SEC) over its failure to disclose a social media influencer’s role in marketing a new exchange-traded fund (ETF). During the launch of the VanEck Social Sentiment ETF in 2021, the company did not fully reveal the participation of a prominent online figure in its promotional efforts. This ETF aimed to capitalize on “positive insights” from social media and other data sources to guide its investments.

The SEC’s investigation highlighted that Van Eck engaged with a significant yet contentious internet figure to enhance the fund’s appeal, offering a compensation plan that grew with the fund’s size. This arrangement, especially the influencer’s compensation tied to the fund’s success, was not disclosed to the ETF’s board, a move criticized by the SEC for undermining the board’s oversight responsibilities.

Reports from 2021 suggest David Portnoy, Barstool Sports’ founder, was the influencer involved, although the SEC’s announcement did not name him directly. The lack of transparency around this marketing strategy and the influencer’s involvement brought the company under the regulator’s scrutiny, with implications for the ETF’s management and operational strategies.

Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, stressed the importance of transparency from advisers, noting:

“Van Eck Associates’ disclosure failures concerning this high-profile fund launch limited the board’s ability to consider the economic impact of the licensing arrangement and the involvement of a prominent social media influencer as it evaluated Van Eck Associates’ advisory contract for the fund.”

Van Eck has accepted the SEC’s findings without admitting or denying the allegations, agreeing to a cease-and-desist order and censure in addition to paying the civil penalty. This settlement follows closely on the heels of Van Eck’s decision to close down its Bitcoin Strategy ETF after a thorough performance review.