VanEck Settles with SEC and Agrees to Fine for Violating ETF Marketing Rules

VanEck Associates Corporation to Pay $1.75 Million Fine for Failure to Disclose Influencer Marketing in Social Media-Focused ETF Launch

VanEck Associates Corporation has been fined $1.75 million by the Securities and Exchange Commission (SEC) for its launch of a social media-focused exchange-traded fund (ETF) in 2021. The SEC found that VanEck did not fully disclose the involvement of a prominent social media personality in promoting the fund, resulting in a civil penalty for the investment adviser.

The SEC’s statement on February 16 revealed that during the launch of the VanEck Social Sentiment ETF in March 2021, the company collaborated with an influential online personality to boost the fund’s success through social media. The ETF aimed to track an index using positive insights from social media and other data sources, but the SEC discovered that the undisclosed influencer was promised higher compensation as the fund grew.

While the SEC did not name the influencer, previous reports have linked Barstool Sports founder David Portnoy to the promotion of the VanEck ETF. This undisclosed detail raised concerns for the regulator, as it was tied to the influencer’s fee being dependent on the fund’s growth.

SEC Criticizes VanEck for Hidden Deal with Influencer, Citing Lack of Transparency and Violation of Board’s Duty

The Securities and Exchange Commission (SEC) has reprimanded VanEck for failing to disclose a hidden deal with an influencer, which had significant implications for the management contract and fund operations of the company’s ETF. The SEC’s criticism focused on VanEck’s failure to inform the ETF’s board about the influencer’s intended involvement, violating the board’s duty to oversee financial aspects during advisory contract discussions.

According to Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, the lack of transparency from advisers hinders the board’s ability to properly assess the advisory contract and understand the economic impact of licensing agreements. This highlights the need for transparency in the crypto industry, especially as it continues to grow and gain mainstream attention.

VanEck has admitted to violating the Investment Company Act and Investment Advisers Act and has agreed to a cease-and-desist order, censure, and financial penalty. However, the company has not acknowledged or denied the findings.

VanEck Lowers Fees for Dedicated Bitcoin ETF, Following Termination of Bitcoin Strategy ETF

In a move to boost the popularity of its dedicated Bitcoin ETF with the ticker HODL, VanEck has announced a reduction in fees from 0.25% to 0.20% as of February 21st. This comes after the company’s decision to terminate its Bitcoin Strategy ETF a month ago, following a thorough performance evaluation.

As the crypto industry continues to evolve and adapt to the growing demand for digital assets, companies like VanEck must ensure transparency and compliance to avoid similar issues in the future. With the rise of web 3.0 and its impact on businesses, the need for accurate disclosures and proper oversight will only become more crucial in the world of crypto.