FTX’s viral Super Bowl ad included several versions of a highly skeptical Larry David. Given the collapse of cryptocurrency exchanges, his fellow celebrities may have done well to heed his advice.
creator of my neighbor seinfeld When curb your enthusiasm is one of several stars who have been sued for promoting FTX’s services and products. The lawsuit alleges they lured an uninformed investor into a fiasco.
Celebrities’ notoriety and wealth made them easy targets for investors looking to recoup some of their losses, according to legal experts, and the company and co-founder Sam Bankman Freed essentially went bankrupt.
FTX has filed bankruptcy for itself and more than 100 affiliates this month, protecting it from lawsuits. Promoters not in bankruptcy court have no such protection.
John Reed Stark, former director of the Internet Enforcement Office of the U.S. Securities and Exchange Commission, said, “Lawsuits against celebrities would make a ton of money as they all settled.
“It’s one thing to get fans to buy you a T-shirt with your face on it. It’s another thing to promote something that causes them to lose their savings.”
At least three lawsuits have been filed since the FTX implosion, including one seeking to represent “thousands, if not millions, of consumers nationwide.” I’m here.
Defendants also include Tom Brady, Gisele Bundchen, Stephen Curry, Shaquille O’Neal, and businessman and television personality Kevin O’Leary.
If the investor can prove that the investor failed to disclose that he or she received compensation to promote a virtual currency exchange, invested in a company, or sold unregistered securities, A person can be held responsible.
The pending lawsuits are pending in federal courts in Miami and San Francisco.
A representative for the star did not respond to a request for comment on the lawsuit.
FTX’s sudden collapse cost US investors more than $11 billion, according to a Miami lawsuit filed on November 15. With 5 million users worldwide, the platform traded over $700 billion in cryptocurrencies last year.
“The liability of celebrities rests primarily on whether the product they advertise is a security,” said Rep. of people suing for alleged corporate abuses who were not involved in the FTX case. Serving as Shane Ceppini said.
If FTX’s yielding accounts, which pay interest on cryptocurrency holdings, turn out to be securities, “the celebrities who promoted them could suffer great losses,” he said.
Courts tend to rely on the Howey test to determine whether a particular item constitutes a security.
Its name comes from the Supreme Court’s 1946 definition of a security as “an investment of money in a joint enterprise, the profit of which is derived solely from the efforts of others.”
If the item in question meets that definition, the court said it does not matter “whether the enterprise is speculative or non-speculative, or has real estate sales of intrinsic value or not.” I judged.
Joseph Rotunda, executive director of the Texas Securities Commission, filed a declaration last month declaring that yield-bearing accounts are the sale of unregistered securities. It is also a violation of securities laws to promote securities without disclosing the source, nature or amount of the compensation.
On Monday, Rotunda said his office was reviewing payments received and disclosures made by celebrities.
“We’re taking a closer look at them,” he said, as part of the regulator’s broader investigation into FTX’s failures.
Brady and Bündchen will be joining the company’s $20 million ad campaign in 2021, “FTX. Are you in?” They also acquired his FTX Trading stake, according to Miami’s complaint.
ABC’s O’Leary shark tank and CNBC’s money coatwas an investor and a paid spokesperson for FTX.
Tennis star Naomi Osaka, who was similarly sued, advertised a lucrative FTX account in which Hong Kong resident Canadian Elliot Lam lost $750,000 in investments, according to a class action lawsuit filed in San Francisco. .
David’s comic persona and quirky role in the Super Bowl ad could prove oblique enough to win the lawsuit, legal experts say.
Commercials featured him as someone skeptical of Sony’s Walkman and other inventions, such as the wheel before.
“Don’t be like Larry,” the ad warned.
But the only allegation about the comedian, “is that Larry David appeared in a commercial,” said attorney Brian Levin. not.”
Stark, the SEC’s former Internet operating officer, finds it “ironic” and “dazzling” that David played a character in the ad who keeps saying no, including FTX.
“There are enough celebrities to choose from,” he said. “I’ll probably leave him alone so the water doesn’t get muddy.”
Lawyer Demetri Bezaintes said as the fallout in FTX became more apparent, investors from Bankman-Fried and other places where many investors are based, including South Korea, Singapore and Japan. More lawsuits are expected to be brought against celebrity supporters.
One way is to have your fans buy you a T-shirt with your face on it.It’s another thing to advertise something that causes them to lose their life reserves
John Reid Stark, former Chief of Internet Enforcement Office of the U.S. Securities and Exchange Commission
The law firm that filed the complaint in Miami filed another class action lawsuit in South Florida a week later.
This isn’t the first time celebrities have made a fuss over cryptocurrency promotions.
Kim Kardashian and Floyd Mayweather Jr. have been sued in Los Angeles over promoting Ethereum Max tokens.
In a preliminary judgment on November 7, the judge dismissed the case, saying the defendants had not advertised the tokens as security.
Kardashian paid $1.3 million last month and agreed not to promote digital assets for three years, settling the SEC’s allegations that he broke rules by promoting tokens without disclosing that he had received payment. did.
Mayweather and music producer DJ Khaled were accused of violating securities laws in 2018 by failing to disclose payments received to facilitate initial coin offerings on social media.
Both settled with the SEC, with Mayweather paying over $600,000 and Khaled losing over $150,000.
Updated: Nov 24, 2022, 8:00 AM