$1 billion lawsuit against YouTube influencers who promoted FTX
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A class-action lawsuit has named famous finance influencers on YouTube for their role in promoting cryptocurrency exchange FTX and sued them for $1 billion in damages, CryptoSlate reported. Founded by Sam Bankman-Fried (SBF), FTX was one of the most popular crypto exchanges in the world before it filed for bankruptcy in November last year.
Social media influencers are people who promote products to their large number of followers, creating an impression that they themselves have used the product and trust it. However, it is common practice for influencers to promote products after receiving a fee from their promoters, which they may not necessarily disclose to their audience.
Sued for promoting unregistered securities
The lawsuit filed by Edwin Garrison alleges that finance influencers named in their complaint promoted FTX crypto fraud without disclosing the compensation they received. The plaintiffs, who hail from different countries, allege that they purchased a yield-bearing account (YBA) that was promoted by the defendants and suffered losses through the purchase.
According to the Securities and Exchange Commission (SEC) in the U.S., the securities laws apply to cryptocurrencies even though many in the cryptocurrency industry have argued against it. Including cryptocurrency as securities attract intense standards for their advertisement, something that the plaintiffs are hoping for as they seek $1 billion in damages.
If the FTX accounts are considered securities, the YouTubers could be liable for not sharing how much FTX paid them. As per a previous CNBC report, crypto firms have paid influencers as much as $65,000 for a single promotional video. The Federal Trade Commission (FTC) guidelines dictate that creators and influencers on social media disclose that they are being paid to promote a product.
The lawsuit has named YouTubers Kevin Paffrath, Graham Stephan, Andrei Jikh, Jaspreet Singh, Brian Jung, Jeremy Lefebvre, Tom Nash, Ben Armstrong, and Erika Kullberg, alongside talent management company Creators Agency LLC, as respondents in the case.
Ben Amstrong, who goes as Bitboy_Crypto on social media, tweeted in response,
Countersuit coming. The lawyers on this case can’t possibly be more stupid. I’ve never had contact with anyone at FTX and never even had a reflink.
— Ben Armstrong (@Bitboy_Crypto) March 16, 2023
Show me you are dumb without telling me you are dumb.
I’m going to roast these Low IQ plebs and their lawyers https://t.co/1y2ct85vFq
Another influencer, Kevin Praffarth, told Tech Crunch that the allegations were false and that all his content that promoted FTX carried a disclaimer that it was paid.
In a previous instance of non-disclosure of a crypto promotion, influencer Kim Kardashian settled with the FTC for $1.26 million for not disclosing that she was paid $250,000 for the promotion of EthereumMax’s EMAX token.
Other celebrities who are caught in the FTX collapse are former NBA superstar Shaquille O’Neal and Shark Tank television host Kevin O’Leary, who have publicly accepted that they were paid for promoting the now-bankrupt cryptocurrency exchange.
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