Did celeb endorsements dupe crypto investors?
The Future. As more people suffer significant losses on NFTs, they’re putting the blame on celebrities who encouraged them to invest in the virtual assets. Some investors are even taking their grief to court – which could finally lead to establishing clear ground rules for the cryptocurrency space… if it survives the winter, of course.
Celeb snake oil?
The Wall Street Journal illuminates the lack of transparency in celebrity financial endorsements — and the resulting legal consequences.
- In California, a lawsuit accuses Madonna and a half-dozen other celebs of convincing investors to buy Bored Ape Yacht Club NFTs at inflated prices without disclosing they had been paid for their promotions. A representative for Madonna claims the musician bought her own Bored Ape, while a rep for Yuga Labs insists, “We have never paid anyone, famous or not, to join the club.”
- In Florida, a lawsuit accuses Tom Brady and other defendant celebs of violating state securities and consumer protection laws by failing to provide specific details about their paid FTX promotions. While they disclosed their partnerships with FTX, they did not perform due diligence before promoting its products, according to the suit.
A wild legal landscape
The SEC requires celebrities who promote virtual tokens it considers securities to disclose “the nature, scope, and amount of compensation they receive.” But its publicly available framework for determining which tokens are securities still confuses investors.
“The SEC hasn’t shared its view on most if not all of the most widely traded tokens,” lawyer Philip Moustakis, a partner at Seward & Kissel LLP, tells the WSJ. “If they had done that, there would be far more clarity for investors and far more clarity for the markets.”
If the downfall of FTX proves anything, it’s investors shouldn’t trust anyone but themselves to make the right financial decisions.