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Why are Celebrities being Targeted in the FTX Case? Is Brand Endoresemnt Illegal Now?

  • Edwin Garrison filed a class-action lawsuit against SBF on behalf of Investors.

  • Crypto exchange promoters such as Larry David, Naomi Osaka, Gisele Bundchen, and Shaquille O'Neal have also been named as defendants.

  • The suit accuses the crypto platform's promoters of soliciting investments from inexperienced investors in breach of securities laws.


Why are Celebrities

Investors have filed a class action lawsuit against FTX founder Sam Bankman-Fried and a number of celebrities who endorsed the cryptocurrency platform, including Larry David, Tom Brady, and Stephen Curry.

The proposed class action claims that FTX was a “Ponzi scheme” that improperly shifted customer assets amongst its affiliated entities. It accuses the company and the endorsers of marketing unregistered securities.

In addition to FTX, the lawsuit includes NFL star, Tom Brady and his supermodel ex-wife Gisele Bundchen, NBA legends Steph Curry and Shaquille O'Neil, MLB players David Ortiz and Shohei Ohtani, and the Golden State Warriors as defendants.

Investors argue that FTX's celebrity endorsers violated securities legislation by soliciting investments through misrepresentations and omissions made and broadcast across the country via television and the internet.

According to the Federal Trade Commission (FTC), consumers have lost more than $80 million in crypto scams since October, owing largely to celebrity endorsements. Is this implying that brand endorsements in the United States are absolutely illegal? But first, let's look at other similar instances.

Celebrities who bet on crypto have been Burnt

This is not the first time when celebrities are sued for endorsing crypto exchanges and their services. On January 7, celebrities Kim Kardashian, former NBA star Paul Pierce and boxer Floyd Mayweather faced a class-action lawsuit. 

As per the lawsuit, the trio acted as celebrity endorsers for EthereumMax, or EMAX, which was marketed to investors as a disruptive new cryptocurrency. Later, Kim Kardashian and Floyd Mayweather Jr. won a preliminary court ruling in the lawsuit regarding the EMAX token.

The same scenario is unfolding with FTX, where celebrities only promoted their brand rather than their native token. So, let's get back to our initial question about brand endorsement.

Is brand endorsement illegal in the US, or is this an attack on crypto in general to prevent any endorsement?

The SEC has yet to establish clear laws for cryptocurrencies, and they are battling to regulate the currency. This lack of clarity has had a knock-on effect on the endorsers of these crypto platforms.

However, one thing is certain that the SEC has previously expressed concerns about crypto for its functioning as a security or commodity. But there is no specific regulation in the US that considers brand endorsement as illegal. So, one more question that comes to mind is, is this an attack on cryptocurrency in general to prevent any endorsement?

As previously reported, the top US banking regulator at the Federal Reserve is urging Congress to pass regulation that would impose regulation on cryptocurrencies in the aftermath of FTX's swift collapse.

All this might be an indication that it is simply a move to discredit crypto brand endorsement. However, it will be interesting to watch what judgment comes from this lawsuit so stay tuned with CoinGabbar for the upcoming updates.

What are your thoughts regarding this matter? Share your views in the comment section below.

Read also: World Population Turned 8B, Will Everyone Use Crypto as per CZ?

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