A new class-action lawsuit accuses crypto influencers including Ben Armstrong aka Bitboy of promoting FTX without disclosing compensation.
The lawsuit also alleges that the defendants replaced YouTube clips promoting former FTX CEO Sam Bankman-Fried with videos apologizing for their support of both the exchange and Bankman-Fried.
Crypto Influencers Hide Behind Language, Says Lawyer
Adam Moskovitz will represent US and non-US plaintiffs in the class-action suit against Armstrong, Erika Kulbergum and Kevin Pfrath.
The lawsuit adds to a growing list of cases against celebrities who promote FTX. Some Influencers make money on FTX from the trading of clients they referred.
Crypto podcaster Anthony Pompliano promoted the exchange in 2022, while Shark Tank investor Kevin O’Leary reportedly received $15 million for promoting the now-defunct exchange.
In the US, the Securities and Exchange Commission has outdated rules that compel securities promoters to disclose conflicts of interest. They have to disclose the nature, amount and source of their remuneration.
The SEC charged TV celebrity Kim Kardashian with $1.26 million in 2022 for illegally promoting a crypto asset.
A partner at law firm Lowenstein Sandler LLP said influential people in the US often try to avoid disclosure by arguing that the assets they promote are not securities.
The upcoming EU market-in-crypto-assets bill will charge promoters who do not disclose compensation with market manipulation.
While it is unclear whether endorsement contracts with Bitboy and other influencers are still in force, several FTX promotional contracts have either been replaced or terminated since the exchange’s bankruptcy.
Miami-Dade County removed the company’s logo from its Miami Heat basketball arena shortly after FTX filed for bankruptcy in November 2022. Per its contract with the county, FTX is required to pay a three-year fee, which CoinDesk estimated at $16.5 million.
Formula 1 team Mercedes removed the FTX logo from their cars and driver livery shortly after filing for bankruptcy. Major League Baseball umpires will not wear FTX patches on their uniforms for the 2023 season.
Alameda CEO’s compensation pales in comparison to SBF
In other FTX news, a recent court filing from FTX revealed that former CEO of FTX affiliate Alameda Research Caroline Ellison received $6 million in kickbacks and loans primarily from the firm she oversaw. Alameda Research was the market maker for FTX.
According to the filing, her compensation pales in comparison to her male counterparts within FTX’s group of companies.
Former FTX CEO Sam Bankman-Fried received $2.2 billion from Alameda, while Nishad Singh, the company’s previous director of engineering, received $587 million. Former CTO Gary Wang was reportedly paid $246 million.
Ellison, Wang and Singh pleaded guilty to charges related to alleged fraud committed before FTX filed for bankruptcy by Sam Bankman-Fried. Bankman-Fried has pleaded not guilty to twelve counts of fraud, money laundering and campaign finance violations. He is currently out on recognizance bond secured by his parents’ home.
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