Nearly a dozen high profile celebrities are named defendants in a class action lawsuit against the failed cryptocurrency exchange FTX. Tom Brady, Stephen Curry and Shaquille O’Neal headline a list of playmakers who endorsed the platform through various campaigns.
The lawsuit loops in 11 celebrities and the Golden State Warriors with FTX founder Sam Bankman-Fried, accusing the platform of false representations and deceptive conduct. The crypto exchange collapsed last week after customers rushed to withdraw money based on revelations of blurred financial lines between two of Bankman-Fried’s companies. He is being accused of misusing customer funds, FTX filed for Chapter 11 bankruptcy protection, and more than a million people could be impacted.
“FTX’s fraudulent scheme was designed to take advantage of unsophisticated investors from around the country, who utilize mobile apps to make their investments. As a result, American consumers collectively sustained over $11 billion dollars in damages,” the claim reads.
What the celebrities did for FTX
Many of the celebrities, O’Neal, Brady, supermodel Gisele Bündchen, Miami Heat power forward Udonis Haslem and MLB Hall of Famer David Ortiz, participated in FTX’s widely-distributed “You In?” campaign. Curry starred in FTX’s “Not An Expert” commercial while Larry David was the face of a 2.5-minute Super Bowl commercial heralded as one of the best in 2022.
Others, including four-time Tennis Grand Slam Champion Naomi Osaka, NFL quarterback Trevor Lawrence and MLB MVP Shohei Ohtani, were promoted as brand ambassadors. The Golden State Warriors had a corporate partnership and displayed an FTX logo on the court. Shark Tank judge and investor Kevin O’Leary is a self-proclaimed paid spokesperson and shareholder.
“Big advocate for Sam because he has two parents that are compliance lawyers. If there’s ever a place I could be and I’m not going to get in trouble, it’s gonna be at FTX,” O’Leary said during the Converge 2022 conference roughly one month before FTX’s implosion.
The plaintiff, Edwin Garrison, said he suffered damages from investing in and executing trades on the FTX platform, claiming he did so after “being exposed” to some or all of the advertisements and endorsements in question. He filed the class action in the U.S. District Court for the Southern District of Florida.
The legal game
“Yes, celebrities can be held liable, one, if they didn’t disclose how much they were being compensated,” attorney Deborah J. Blum said. “Another way is there’s an anti-fraud provision by the SEC that prohibits the dissemination of false or misleading statements when promoting a security.”
Many of the ads in question promoted FTX as a safe, accessible and easy way to get into cryptocurrency trading.
“They’re not promising you that you’re gonna get a crazy return. They’re not telling you, ‘Put in $1 and you’re gonna get $100 back.’ They’re using really immaterial words that we use in everyday vernacular,” Blum said. “So of course, attorneys are going to come in and argue that the statements that they made did not meet whatever this standard is for them to be liable.”
The celebrities involved have yet to publicly comment on the litigation. But this isn’t the first time celebrities have faced legal action over endorsements. Kim Kardashian and Floyd Mayweather both paid SEC fines for promoting cryptocurrency without disclosing payments, while other influencers, including Kendall Jenner and Emily Ratajkowski, faced lawsuits claiming they made misleading statements while promoting the disastrous Fyre Festival. Jenner recently settled her suit for $90,000, a portion of what she was paid.
“I think celebrities now going forward are going to know, ‘Let me consult with an attorney first and find out what I have to do in order to not end up with a lawsuit after the fact,’” Blum said.
