FTX class action lawsuit scrutinizes crypto endorsements

The founder and former CEO of FTX, Sam Bankman-Fried (SBF), along with a number of other defendants, including sports and entertainment celebrities such as Tom Brady, Gisele Bundchen, Stephen Curry, the Golden State Warriors, Shaquille O'Neal, Udonis Haslem, David Ortiz, William Trev

 

In the 41-page document dated November 15, 2022, the plaintiffs stated that FTX, through false representations and deceptive conduct, took advantage of unsophisticated American investors, resulting in damages of over $11 billion. The plaintiffs claimed that this took place as a result of FTX's "taking advantage" of these investors.


The offer and sale of yield-bearing accounts (YBAs) to residents of the United States of America, which it termed as unregistered securities, is the subject of the class action lawsuit that has been filed against the defendants as well as all parties that either controlled, promoted, assisted in, or actively participated in FTX Trading.

Tweets from SBF providing an explanation of where FTX went wrong were included in the class action document. In addition, the representative statements and advertisements that the defendants used to promote the offers and/or sales of the YBAs were provided in detail as part of the class action lawsuit.


In addition to this, it was alleged that the defendants had used social media hype to aggressively market the FTX platform to their followers. According to the allegations made in the class action lawsuit, a number of the defendants endorsed the FTX platform in exchange for an equity stake and payments in an amount that was not specified in terms of cryptocurrency.

 

Kim Kardashian was charged by the United States Securities and Exchange Commission (SEC) in October 2022 for allegedly promoting on social media a crypto asset security that was offered and sold by EthereumMax without disclosing the payment that she received for the promotion. The cryptocurrency in question was offered by EthereumMax. The charges against Kardashian were dropped in exchange for her agreement to cooperate with the SEC's ongoing investigation and pay a total of $1.26 million in fines, restitution, and interest.


Gurbir S. Grewal, Director of the SEC's Division of Enforcement, stated that the federal securities laws make it abundantly clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion. "The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must do so," "Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information," said the spokesperson for the reality television star.

In a press release dated November 16, 2022, the United States House Committee on Financial Services stated that it would collaborate with Congress in order to ensure that crypto failures, such as the most recent failure of FTX, would never occur again. In December 2022, the committee will conduct an investigation into the failure of FTX by holding a hearing that will be open to both Democrats and Republicans.


Orizu Ebube

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