TikTok has become “a financial cesspool for some of the darkest actors on the planet” because people using the social media platform are driven by a need to have a social identity that is so powerful it is effectively a cult, says a Cambridge academic in a new study.
Alan Jagolinzer, Professor of Financial Accounting at Cambridge Judge Business School, says that cryptocurrency influencers use TikTok - and other social media platforms - because the platform exploits powerful social-psychological factors that draw audiences (including crypto-investors) to influencers.
The draw is so strong that participants in quasi-Ponzi currency escapades overrule their own understanding that digital currencies like Bitcoin support the most ruthless global drug, human, and weapons trafficking, and sextortion scams.
In his study, recently published in the Review of Accounting Studies, Alan outlines the mechanisms which allow even apparently rational people to succumb to the lure of these dark actors - which include states such as Russia as well as individuals and crime organisations.
“The drive to be part of an ‘in crowd’ is so profound,” he says, “that many people will engage in self-destructive behaviour to obtain access or increase status in certain communities. Crypto influencers exploit this and can financially profit from their flock of believers.”
The drive to be part of an ‘in crowd’ is so profound, he continues, that many people will engage in self-destructive behaviour to obtain access or increase status in certain communities. Crypto influencers exploit this and can financially profit from their flock of believers.
Particularly, crypto traders tend to disproportionately be young men, thus prompting the slang term ‘crypto bros’.
“Some crypto coin offerings try to draw cult-like followings based on names tied to religious ideals, popular fads, popular movements, popular phrases, or influential people,” the paper says, with names such as JESUS, FART, King Trump, various versions of Elon (as in Elon Musk), and Good Gensler coins, “named, probably sarcastically, after the current Securities and Exchange Commission Chair (Gary Gensler), who has publicly stated that he believes the industry is ‘rife with fraud and manipulation’”.
One coin named as CULT was launched with a manifesto that says: “I want CULT to invest in radicals and revolutionaries, CULT is a home for outcasts, for those who feel insane, for those who are and FEEL different, we are the gunpowder, the ignition, we are the all-singing, all-dancing, crap of the world.”
Even more seriously Alan’s paper notes recent attempts to undermine the regulatory authority of the US Securities and Exchange Commission and the state of Delaware judiciary as examples of these efforts - meaning that these dark actors are not just ‘outside’ the conventional financial system, but also inside it.
He suggests that “research should explore market implications conditional on this stress” if regulatory systems continue to face pressure from political or other influencers.
“For example, it would be interesting to understand how markets might internalise harassment of regulators, threats to regulators’ family members, or nuisance suits, legal delays, and administrative requests - for example, under FOIA [the US Freedom of Information Act] - that are designed to overwhelm presumably limited regulatory resources.”
Crypto, he concludes,“is an inherently populist movement. Populism intentionally undermines existing enforcement and stability infrastructure because those who share the populist beliefs do not trust that infrastructure.”
Prof Jagolinzer is the organiser of the annual Cambridge Disinformation Summit.
