Finance YouTubers sued for promoting FTX
A new class action lawsuit alleges that several well-known financial YouTubers, including Graham Stephan, Andrei Jikh, Jaspreet Singh, and others, should be held responsible for promoting the now-disgraced cryptocurrency exchange FTX.
The plaintiff of the lawsuit is Edwin Garrison, a private investor who also filed a lawsuit against former FTX CEO Sam Bankman-Fried, plus celebrity promoters such as Tom Brady, Stephen Curry, Shaquille O’Neal, Larry David, Kevin O’ Leary and others. Bankman-Fried also faces numerous allegations of fraud from multiple U.S. government agencies, including the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
According to the Federal Trade Commission’s (FTC) guidelines for social media influencers, creators must clearly disclose when they are being paid to promote a product. Kim Kardashian, for example, settled with the FTC for $1.26 million last year for failing to properly disclose that she was paid $250,000 to promote EthereumMax’s EMAX token.
While FTX has paid Defendants lavishly to promote its brand and encourage their followers to invest, Defendants have not disclosed the nature and scope of their sponsorship and/or endorsement agreements, payments and compensation, nor have they provided adequate (if any) ) due diligence performed,” the lawsuit reads.
One of the influencers involved in the lawsuit, Kevin Paffrath, told CoinTech that this claim is false.
“It’s pretty clear that when we regularly say, ‘Hey, we’re sponsored by…’ in our videos, or ‘Brought to you by…’, you know, this is an ad,” he told CoinTech . “We even have to tick a box on our videos that says, ‘Hey, this video contains a paid promotion,’ and all of our FTX videos have a little disclaimer saying this is paid.”
The lawsuit also alleges that the YouTubers participated in a civil conspiracy with FTX and misled customers “with the false impression that all cryptocurrency assets on the FTX platform were safe and not invested in unregistered securities.”
SEC Chairman Gary Gensler has claimed that existing securities laws apply to cryptocurrencies, when many in the crypto industry argue otherwise. This lack of clarity makes it more challenging for crypto companies and influencers alike to know when to adhere to stricter securities advertising standards.
“Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose when and how much they are paid to promote securities investing,” Gensler said when Kardashian settled with the SEC.
If FTX accounts are considered securities, these YouTubers could be held liable for not sharing exactly how much FTX paid them.