Crypto celebrities will pay for everything
Investors and regulators are out of sorts. In the midst of a crypto winter, they seek satisfaction not only from bankrupt exchanges but also from celebrities promoting crypto.
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“And in these moments of truth, these men and women, these mere mortals, just like you and me … as they peer over the edge, they calm their minds and steel their nerves with four simple words that have been whispered by the intrepid since the time of the Romans: “Fortune favors the brave.” The pathos of American actor Matt Damon in the Crypto.com viral video initially caused ridicule and bewilderment among the audience. A year later, when the cryptocurrency market lost nearly $2 trillion, many cryptocurrency investors blamed Damon and other celebrities for their own investment mistakes. Does that make sense?
Celebrities didn’t talk about their earnings from crypto promotion
Reality TV star Kim Kardashian agreed to pay a $1.26 million fine to the US Securities and Exchange Commission (SEC) last fall. The movie star was accused of concealing details of her collaboration with EthereumMax, which she supported with posts on Instagram in the summer of 2021. Kim forgot to mention that her admiration for the token was motivated by $250k she had received for advertising.
Later, investors sued TV host Jimmy Fallon, singer Justin Bieber, and tennis player Serena Williams in a class action lawsuit. The Bored Ape Yacht Club NFTs, which these celebrities promoted, has lost value.
“Celebrities and others are using social media networks to encourage the public to purchase stocks and other investments. These endorsements may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement”
according to the SEC.
The collapse of the FTX cryptocurrency exchange completely unleashed a wave of animosity toward public figures who promoted cryptocurrency investing. A few of the celebrities that insolvent investors have subpoenaed include singer Madonna, actress Gwyneth Paltrow, and member of the Baseball Hall of Fame David Ortiz. A lawsuit was also be brought against NFL player Tom Brady and supermodel Gisele Bündchen, who purchased an undisclosed stake in FTX in 2021. The lawsuits claim that they failed to properly disclose their involvement in the crypto companies they promote.
Celebrities will be responsible for the bankruptcy of investors
Buying a Gatorade bottle or a Rolex watch shilled by a celebrity probably never put someone’s life savings at risk (however, as global inflation rises, the situation may change dramatically.) However, advertising support for cryptocurrencies is “different,” according to John Reed Stark, former Chief of the SEC's Office of Internet Enforcement. As it turned out, both the SEC and the Justice Department have also created special crypto units. Stark believes that regulators have some of these celebrity endorsers squarely in their sights and, when appropriate, will pursue them aggressively.
In its recent action against FTX’s founder, Sam Bankman-Fried, the SEC claimed that the use of positive celebrity reviews by the crypto exchange is allegedly part of a fraudulent scheme. The nature of the agreements and joint efforts between FTX and celebrities will be thoroughly investigated. Will they be charged accordingly? It depends on what celebrities knew, the nature of their compensation, and the extent of their involvement in FTX activities.
Unfortunately, when crypto companies go bankrupt, their customers too often find themselves designated as unsecured creditors, last in line for restitution.
“And when regulators and prosecutors conduct the archaeological dig to figure out who is responsible, fame should not provide anyone with a “get out of jail free” card”
Stark says categorically.
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