With FTX and more than 100 of its affiliated companies having filed for bankruptcy protection, the celebrities who endorsed the firm reportedly still present an opportunity for those who lost out on FTX to attempt to recover their losses.
At least three lawsuits naming celebrities have already been filed, and with their wealth, fame and potential liability making them a “juicy target,” it is likely that celebrities will settle, Bloomberg reported Wednesday (Nov. 23).
“A lawsuit against celebrities will generate a ton of money, because they will all settle,” John Reed Stark, former chief of the U.S. Securities and Exchange Commission’s Office of Internet Enforcement, said in the report.
Celebrities who promoted FTX and its cryptocurrency offerings reportedly could be liable for damages if the lawsuits proceed, especially if those products are found to be securities, according to the report.
A number of legal experts told Bloomberg another key to the celebrities’ liability is whether they disclosed that they were being compensated for their endorsements.
The three lawsuits that have been filed allege that these endorsements drew in unsophisticated investors, according to the report.
Undisclosed payments or investments and the promotion of unregistered securities would increase the promoters’ vulnerability to these suits.
One of the lawsuits is a proposed class action that accuses several celebrities of promoting unregistered securities and violating Florida’s Securities and Investor Protection Act and the Deceptive and Unfair Trade Practices Act.
This lawsuit, which was filed in U.S. District Court in Miami, names Tom Brady, Gisele Bündchen, Stephen Curry, Larry David and others.
It followed the downfall of FTX, which has trigged a worldwide regulatory investigation and could leave the company dealing with more than 1 million creditors.
As PYMNTS’ Karen Webster wrote, celebrities were captivated by Sam Bankman-Fried’s “altruistic” mission: to make FTX successful just so he could give the money all away. (Or most of it, depending on who asked the question or when.) They wanted to be part of the Effective Altruism thesis that would plow profits back into projects that would save the world.
Now, the regulators, lawmakers and the courts are dealing with the fallout.
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