Hollywood celebrities looking to make a quick buck endorsing cryptocurrency or NFTs are now being told to think twice as angry consumers who experienced losses are taking the stars to court.
Celebrities including Madonna, Justin Bieber, Larry David, and NBC’s Tonight Show host Jimmy Fallon joined the crypto bandwagon only to find themselves defendants in class action lawsuits. Even Kim Kardashian was sued over EthereumMax, though she later settled the matter out of court.
Some Hollywood agents are cautioning their celebrity clients to steer clear of crypto endorsements as the legal dust settles and the courts provide more clarity on a host of complex issues, according to a Wall Street Journal report.
“Promoting a company and promoting a security issued by a company are not necessarily the same thing,” Tibor Nagy Jr., an attorney who represents both plaintiffs and defendants in the cryptocurrency space, told the newspaper. “We should expect judicial guidance and clarity on the rules of the road for celebrities in the next few months.”
In some cases, celebrities are accused of failing to disclose that they were being compensated or were investors in a crypto product or NFT while they were also promoting it.
As Breitbart News reported, Madonna was one of several celebrities sued in a class action suit for promoting an NFT art collection known as the Bored Ape Yacht Club, with plaintiffs alleging they were misled into buying “losing investments at drastically inflated prices.” Other stars named in the suit include Gwyneth Paltrow, Kevin Hart, The Weeknd, Post Malone, and Jimmy Fallon.
Using his perch on NBC’s Tonight Show, Fallon promoted the Bored Ape NFT to millions of viewers.
Tampa Bay Buccaneers quarterback Tom Brady is also among those facing legal action for promoting the crypto exchange FTX, which was led by Sam Bankman-Fried until it spectacularly collapsed late last year.
The lawsuit alleges the defendants violated Florida securities and consumer-protection laws by failing to provide specific information on their compensation in exchange for their promotion, according to the Journal. They are also accused of failing to perform due diligence ahead of promoting FTX products.
As Breitbart News reported, Brady has been sued by a man who described himself as a lifelong New England Patriots fan after he invested his entire life savings in the FTX crypto scheme.
Much of the legal confusion stems from the Securities and Exchange Commission’s ambiguity on what constitutes a “virtual token.”
“The SEC hasn’t shared its view on most if not all of the most widely traded tokens,” lawyer Philip Moustakis, a partner at Seward & Kissel LLP, told the Journal. “If they had done that, there would be far more clarity for investors and far more clarity for the markets.”
Kim Kardashian was sued in a class action suit for promoting the cryptocurrency EthereumMax. The reality TV star eventually agreed to pay $1.26 million to settle SEC charges that she promoted a cryptocurrency on Instagram without disclosing that she’d been paid $250,000 to do so.