Tom Brady pitches cryptocurrency trading platform FTX while strolling through a football stadium.
A respected quarterback who says ‘that’s good’ To tell He’s reviewing his investment portfolio on his mobile phone as he takes to the skies. “And I like it more.”
An ad posted on FTX’s Instagram account in September read: it wasn’t It was the first time Brady threw a formidable weight on a tech company, but it was likely the last.
Balance sheet after a month and a half leaked Alameda Research, a trading company co-founded by former FTX CEO Sam Bankman-Fried, has had a meltdown of epic proportions.
Bahamas-based FTX is currently bankruptcyBankman-Fried sits in Palo Alto. house arrest as he faces fraudSome of the child prodigy’s closest confidants have tipped him off.he pleaded Not guilty.
If the collapse hasn’t completely enveloped Brady, he’s not completely unscathed either. The professional athlete is one of several celebrities who have been sued in class action lawsuits for facilitating the sale of unregistered securities in the form of yielding FTX accounts.
A lawsuit, filed in Miami, shines a spotlight on the important role that notable athletes, actors and other entertainers have played in promoting FTX. Some legal experts find it difficult to prove liability, but a federal lawsuit is forcing a re-examination of how celebrities have been involved with the controversial crypto industry. .
“FTX’s Paid Endorser Program is expressly designed to use positive publicity associated with certain celebrities to convince consumers that FTX is a safe place to buy and sell cryptocurrencies. “Celebrities have a moral and legal obligation to know that what they advertise is unlikely to cause physical or financial harm to their customers.”
Before the stunning implosion, FTX brought together celebrity sponsorships to rival the red carpet, giving the ill-fated Trump home glitz and glamour.
Larry David Starred The FTX Super Bowl ad framed cryptocurrency as a world-historic innovation on a par with wheels and light bulbs.
Shaquille O’Neal Asked Would-be Investor: “I agree. What about you?”
Other familiar names — Stephen Curry, David Ortiz, Shohei Ohtani, Naomi Osaka, Kevin “Mr. Wonderful” O’Leary — also promoted the company. All are listed as defendants.
Adam Moskowitz, one of the lawyers who filed the suit, said, “This is a warning to celebrities: ‘If you’re going to take risks, there will be consequences.'”
Lawyers for Brady and David declined to comment. Representatives for O’Neill, Curry, Ortiz, Ohtani, Osaka and O’Leary did not respond to requests for comment. O’Leary, known for his role as a celebrity investor on “Shark Tank,” told CNBC’s “Squawk Box” that his involvement with FTX was the result of “groupthink.” said.
Brady and his supermodel ex-wife, Gisele Bündchen, may have lost most or all of the sizable financial stakes they had in FTX, in addition to lasting reputational damage.
The crypto space has long been flooded with A-listers. Matt Damon, LeBron James, Reese Witherspoon, Snoop Dogg, Steve Aoki, and Steven Seagal are all behind various cryptocurrency products.A year ago, Jimmy Fallon and Paris Hilton were awkward shilling On “The Tonight Show”, a particular class of cryptography, non-fungible tokens. Cryptocurrency trading was featured prominently in his 2021 music video released by The Post His Malone and The Weeknd.
And celebrity scandals do happen, especially in an industry as loosely regulated as cryptocurrency. The SEC indicted Floyd Mayweather Jr. and his DJ Khaled in 2018 for failing to disclose that they were paid to promote crypto tokens.Kim Kardashian suffered a similar fate in October. (At the time, Kardashian’s attorney said she was happy the socialite fully cooperated and resolved the issue.)
According to Information, FTX’s downfall has affected others in the entertainment industry, including former CAA agent Michael Kibbs, who received a $300 million investment from Bankman Freed. there is The former CEO was reportedly hoping to land a sponsorship deal with music mogul Taylor Swift, but it never materialized.
It’s no coincidence that Hollywood’s star power often seems to overlap with otherwise fairly niche financial instruments, experts say.
“Celebrity endorsements have been important to crypto for a very long time. has relied on to achieve mainstreaming, as celebrities use their existing social media networks and their credibility and reputation to promote an asset class that many people are unfamiliar with.”
Bonnie Patten, executive director of consumer watchdog Truth in Advertising, said:
Moskowitz, the attorney behind the class action lawsuit, said he has been pursuing fraud cases related to cryptocurrencies for some time. A more formal crypto platform in the last two years.
Lawyers now want to take responsibility for what many celebrities said Bankmann-Fried had piggybacked on their reputations. Moskowitz said that seeking out celebrity sponsors that FTX victims owed would provide a faster path to recovering what FTX victims owed, and that he was stymied by the Bankman. – said it’s a faster way than trying to get the money out of Fried and his battered empire.
“There are people who have lost millions of dollars because they said this was the safest investment with an 8% interest rate.” A safe place to park their money.
“People look up to celebrities,” he added. By recruiting them as sponsors, “for good or bad, people respect them and you gain some sort of social acceptance.”
Founded in 2019 and worth $18 billion by 2021, FTX has been a staple in the cryptocurrency industry. One reason for this is that Bankman-Fried actively curates its political ties, including campaign donations, to create an aura of respectability that many of the rest of the companies do. It was lacking in the crypto industry, which is full of scams and price volatility. As the sector struggled this summer, FTX sent other crypto firms acquisitions and acquisition offers despite the Federal Deposit Insurance Corporation ordering it to stop suggesting that crypto investments are backed by the government. did
The company’s reputation really began to crumble in November when Alameda Research’s balance sheet was leaked, setting off a domino chain reaction that led to bankruptcy, house arrest and a class action lawsuit against Moskowitz.
In addition to that lawsuit, attorneys have also filed lawsuits against Brady, Ortiz and O’Leary in Florida state court, which they hope will lead to a ruling on whether FTX’s interest-bearing accounts are unregistered securities.
For Moskowitz, the question is simple.
But others are less certain.
Sheila Warren, chief executive of the Crypto Council for Innovation trade group, said: “There is a very strong argument that they don’t exist at all and never will. There is an argument that they started as securities.
“The regulatory framework for the broader crypto market has really not caught up,” said Yadav, associate dean of Vanderbilt Law. “If we are talking about a particular financial institution like FTX that trades in crypto tokens, neither does the institution that trades them, because the tokens themselves do not have a consensus on what is legal.”
Yadav added that courts are unlikely to decide on their own the regulatory model for cryptocurrencies. More likely, some of the celebrities named in the lawsuit chose to settle the case to protect their reputation.
Truth in Advertising’s Patten said it’s hard to win a class action lawsuit, and it’s not easy to prove that celebrity sponsors named in the lawsuit hurt investors.
“I’m not going to bet on the consumer’s side,” she said.
Either way, the reputational damage from an FTX implosion could be scarier than any amount of money for celebrity affiliates. Brady and others lent their fame to Bankman-Fried when he was on top of the world. Now they are stuck in the fallout.
This could result in a long-term change in the way celebrities engage with cryptocurrencies.
Crypto Council CEO Warren said, “I think we should be a little more careful in terms of assessing what the reputational issues are if I step into something.. “Perhaps I should think about what it means to work on something very new.”
Yadav predicts that the crypto industry may now turn to verification sources other than celebrities. For example, regulatory justification.
“Celebrities don’t feel like doing this anymore,” she said. “Certainly not a big name.”