FTX’s viral Super Bowl ad featured multiple versions of a deeply skeptical
The creator of Seinfeld and Curb Your Enthusiasm is among the slew of stars being sued for promoting
Legal experts say the celebrities’ prominence and wealth make them a juicy target for investors looking to recover some of their losses, with the company and co-founder
“A lawsuit against celebrities will generate a ton of money, because they will all settle,” said
At least three lawsuits have been filed since FTX’s implosion, including one that seeks to represent “thousands, if not millions, of consumers nationwide.”
The celebrities could be liable if the investors can prove they failed to disclose that they were being paid to promote the crypto exchange or had invested in the company, or were hawking unregistered securities. The pending lawsuits are in federal court in Miami and San Francisco.
The stars’ representatives didn’t respond to requests for comment on the lawsuits.
FTX’s sudden collapse cost US investors more than $11 billion, according to the Miami lawsuit filed Nov. 15. The platform, with 5 million users worldwide, traded more than $700 billion of crypto last year.
“The celebrities’ liability hinges mainly on whether the products they promoted are securities,” said Shane Seppinni, who represents people suing over alleged corporate abuse and who isn’t involved in the FTX cases. If FTX’s yield-bearing accounts, which pay interest on crypto holdings, are found to be securities, “then the celebrities who promoted them could be on the hook for big damages,” he said.
To determine whether a given item constitutes a security, courts tend to fall back on the
The Texas State Securities Board’s director of enforcement, Joseph Rotunda, filed a declaration last month that the yield-bearing accounts are an offering of unregistered securities. And promoting securities without disclosing the source, nature or amount of compensation would violate securities law.
On Monday, Rotunda said his office was scrutinizing the payments the celebrities received and any disclosures made.
“We are taking a close look at them” as part of the regulator’s broader probe into FTX’s failure, he said.
Brady and Bundchen joined the company’s $20 million ad campaign in 2021 and made a commercial -- “FTX. You In?” -- showing them urging acquaintances to join up. They also took equity stakes in FTX Trading Ltd., according to the Miami complaint.
O’Leary, of ABC’s Shark Tank and CNBC’s Money Court, was both an investor in and a paid spokesman for FTX. He and tennis star
David’s comic persona and quirky role in the Super Bowl ad may prove oblique enough to beat the litigation, legal experts said.
The commercial featured him as a skeptic of other inventions, such as the Sony Walkman and, earlier, the wheel. “Don’t be like Larry,” the ad cautioned. It made FTX one of the most retweeted brands during the game, lawyers for the investor in the Miami complaint said.
But the only allegation about the comedian “is that Larry David appeared in a commercial,” said attorney Brian Levin. “I don’t see how that, in and of itself, would give rise to liability.”
Stark, the former SEC internet enforcement chief, finds “the irony” that David played characters in the ad who keep saying no -- including to FTX -- “glaring.”
“There’s enough celebrities to choose from,” he said. “I’d probably leave him off, so as not to muddy the waters.”
As the impact of FTX’s fall unfolds, more lawsuits are expected to roll in against Bankman-Fried and celebrity endorsers from the US and elsewhere, including South Korea, Singapore and Japan, where many of the investors are based, said attorney Demetri Bezaintes. The law firm that filed the Miami complaint filed another proposed class action suit in South Florida a week later.
This isn’t the first time celebrities have found themselves in hot water over crypto promotions.
Kardashian agreed last month to
A Crypto Kid Had a $23,000-a-Month Condo. Then the Feds Came Bloomberg Opinion: Matt Levine Explains Crypto to You Crypto Firm Genesis Said to Warn of Bankruptcy Without Funds Alameda Former Co-CEO Used Poker, Blackjack Strategies to Trade
--With assistance from
To contact the editors responsible for this story:
© 2022 Bloomberg L.P. All rights reserved. Used with permission.