Several crypto influencers associated with the defunct FTX exchange are being criticized after a recent $1 billion class action lawsuit.
The rise of cryptocurrency has led social media influencers to promote various cryptocurrencies and platforms to their followers. However, these influencers can be held legally liable if they fail to disclose their financial ties to the companies they promote.
The Securities and Exchange Commission (SEC) in the United States has recently taken action against several high-profile social media influencers who have promoted cryptocurrencies without disclosing their financial ties to the companies.
The SEC has argued that these influencers violated securities laws by promoting cryptocurrencies without proper disclosure.
The disclosure issue is important among social media influencers, where followers highly value transparency and authenticity. Failing to disclose financial ties can damage the trust built by influencers with their followers, which can result in legal consequences.
In some cases, social media influencers may need to know legal disclosure requirements. Therefore, influencers should educate themselves on the legal requirements for disclosure and ensure that they comply with them.
To avoid legal trouble, social media influencers promoting cryptocurrencies must disclose any financial ties they have with the cryptocurrency company they promote. This includes a disclaimer in the post or video description, or verbal disclosure of affiliation in the video.
It is also necessary for influencers to be transparent about the risks associated with investing in cryptocurrencies. Cryptocurrency investments are highly volatile and can result in significant losses. Therefore, influencers should make sure their followers are aware of the risks and potential downsides of investing in cryptocurrencies.
Major Public Figures Promote FTX
Let’s focus on the other side of the story, which tells the negative side. The fallout from the FTX crypto exchange prompted a huge liquidity crunch within the market as many users lost money. FTX rose to its dominance with the endorsement of many high-profile figures including athletes and celebrities.
Here are some of the most notable:
- tom brady: American football quarterback and seven-time Super Bowl champion. He signed a long-term partnership with FTX in June 2021 to become the brand ambassador.
- steph curry: Professional basketball player and three-time NBA champion who also partnered with FTX in June 2021.
- trevor lawrence: American football quarterback and the first overall pick in the 2021 NFL Draft. He signed an endorsement deal with FTX in August 2021.
- Kevin O’Leary: Canadian businessman, investor and television personality, who became a strategic advisor to FTX in August 2021.
- Gisele Bundchen: Brazilian supermodel and philanthropist who joined FTX in September 2021 as an environmental and social initiatives advisor.
- Fernando Alonso: Two-time Formula One world champion who signed a multi-year partnership with FTX in October 2021.
- JK Rowling: British author who auctioned off non-fungible tokens (NFTs) on FTX in November 2021 to support her charity, Lumos.
These are just a few examples of high-profile promoters associated with FTX. The company also collaborated with other notable online figures to increase their brand’s visibility and appeal to a wider audience.
Lawsuit targeting YouTube promoters
Several social media users recently became the subject of a 73-page class-action lawsuit. The suit is specifically targeting digital content creators who “actively promoted FTX” and failed to disclose their financial ties to the now-defunct crypto platform.
The plaintiffs are seeking more than $1 billion in damages and were brought against YouTube content creators with massive followings. Representatives of the law firm said the amount sought could rise to $5 billion.
The lawsuit includes allegations of misleading consumers, using deceptive and unfair practices, promoting unregistered securities, and receiving secret undisclosed compensation for promoting FTX.
Speaking to BeInCrypto, Moskowitz Law Firm, led by Adam Moskowitz, said:
“We have asked the Multi-District Litigation Panel to consolidate every existing and soon-to-be-filed related federal FTX case here in Miami, Florida. Class damages could exceed $5 billion.”
core strategy
When asked about the plaintiffs’ strategy, the law firm insisted, “Miami is where FTX was based, many FTX brand ambassadors live in Florida, and Florida law is being used for all injured investors.” ‘
“We have worked diligently over the past six months to organize and coordinate the FTX consolidated actions in federal and state court before the Honorable Michael Heinzmann in Florida state court and Federal Judge Moore and Chief Judge Altonaga in Florida federal court.”
The lead spokesperson, Adam Moskovitz, also appeared in various public interviews to encourage affected users to reach out for a ‘free case review’.
defendants respond
a name in the list, Kevin Pfrath (Meet Kevin), who has over two million subscribers, spoke to renowned investigative journalist Coffeezilla.
Pfrath considered returning some of the money as a ‘charity’, but denied the allegation of disclosing his relationship with FTX in his video.
He told BeInCrypto:
“It’s very clear that when we routinely say, ‘Hey, we’re sponsored by…’ on our videos, or ‘Brought to you by…’, it’s an advertisement. We need to put a small There’s also a little box that says, ‘Hey, this video contains a paid promotion,’ and each one of our FTX ones has a little disclaimer that says it’s paid.
On the other hand, Ben Armstrong (BitboyCrypto) took a slightly different route to clear his name in the lawsuit.
On-line quarrel between the two sides
In response to BeInCrypto, Armstrong claimed that,
“I have never spoken to anyone at FTX or as a marketing agent working on their behalf. not once. Therefore, the allegations leveled against me are 100% false and it would be very easy to provide proof.”
He lured further litigation after allegedly making “endless phone calls, tweets and emails” to Adam Moskowitz, who represents the plaintiffs:
More examples of the alleged conversation can be found here:
a respondent with a twitter handle degenlawyer.eth Criticized Armstrong for his actions:
learning curve
If more crypto exchanges and companies fail, there could be more lawsuits against influencers.
Whether or not a lawsuit is filed against an influencer in such a situation depends on a variety of factors, including the circumstances surrounding the failure of the exchange, the influencer’s actions and statements, and applicable laws and regulations.
To avoid such litigation, legitimate market analysts should conduct thorough research before endorsing any crypto exchange or cryptocurrencies. They must also disclose potential conflicts of interest and provide clear disclaimers regarding the risks associated with investing in cryptocurrencies.
Additionally, they must comply with all applicable laws and regulations governing the securities and investment industries. This includes any disclosure requirements and restrictions on insider trading or market manipulation.
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