A recent class-action lawsuit accuses popular crypto influencers, such as Ben Armstrong (BitBoy), of promoting the FTX exchange without disclosing their compensation. The suit also claims that the defendants replaced YouTube videos that endorsed former FTX CEO Sam Bankman-Fried with apology videos.
Attorney Adam Moskowitz will represent both US and international plaintiffs in the case against Armstrong, Erika Kullberg, and Kevin Paffrath. This lawsuit is part of a growing trend of legal actions taken against celebrities who promoted FTX. Some influencers are known to have earned money from FTX customer trades that they referred.
In the US, the Securities and Exchange Commission (SEC) requires promoters of securities to disclose conflicts of interest, including the nature, amount, and source of their payment. In 2022, the SEC charged Kim Kardashian $1.26 million for unlawfully promoting a cryptocurrency asset. The forthcoming EU Markets-in-Crypto-Assets bill will also charge promoters who fail to disclose their compensation with market manipulation.
Following FTX’s bankruptcy, several promotional contracts with the exchange have been altered or terminated. Miami-Dade County removed FTX’s logo from the Miami Heat basketball arena, and Formula 1 team Mercedes took down FTX’s logo from its cars and driver livery. Major League Baseball umpires will not wear an FTX patch on their uniforms for the 2023 season.
In related news, a court filing revealed that former Alameda Research CEO Caroline Ellison received $6 million in payments and loans, primarily from the firm she managed, which was a market maker for FTX. However, her compensation was significantly less than that of her male counterparts within FTX’s group of companies.