On Tuesday, a class action lawsuit was filed against crypto platform FTX and its former CEO Sam Bankman-Fried for allegedly misleading customers and costing investors to lose billions of dollars.
Although most of the attention in the news has been on Sam Bankman-Fried, and rightfully so, the class action has interestingly named multiple big name celebrities and athletes including Tom Brady, Stephen Curry, and Seinfeld /Curb Your Enthusiasm creator Larry David. The lawsuit alleges that these celebrities, and multiple others, helped build trust in FTX among consumers. It also alleges that these promotional campaigns and endorsements were misleading to consumers.
Although the FTC does prohibit misleading advertisements and endorsements, attaching liability to these celebrities and athletes will be difficult. The plaintiffs will have to show that any one of these named celebrities or athletes knew that FTX was a scam or that they knew that Sam Bankman-Fried was planning to scam FTX’s customers. It is hard to imagine that these athletes or celebrities would jeopardize their careers or reputations to make a quick buck.
You would figure that these celebrities and athletes would have learned from similar, unrelated lawsuits filed against other big name celebrities. For example, earlier this year, Kim Kardashian was fined $1.26 million for failing to disclose the fact that she was paid to endorse the EthereumMax cryptocurrency on Instagram. It is safe to assume for now that celebrities and athletes should simply avoid promoting anything related to crypto. The space is unregulated, vulnerable to fraud and too unpredictable. At the very least, anybody being paid to promote crypto related companies should strictly adhere to the FTC guidelines which can be found on their website.
