These celebs invested in cryptos, and are now in trouble
In 2021, crypto's bullish run attracted several celebrities and top athletes. However, crypto's fall the following year led to many of them finding themselves under the scanner of the law. Several celebrity endorsers and backers of tokens and NFTs have been accused of duping investors. Let's take a look at some of the celebrities who invited trouble due to their cryptocurrency endorsements.
Why does this story matter?
- Endorsements and promotions by celebrities have been an age-old advertising tactic to attract the public. Therefore, seeing several celebrities joining the crypto hype train was not surprising.
- However, crypto's steep decline in 2022 led to many investors losing money. And some of them were allegedly attracted to the prospect of being an investor in a token alongside their favorite celebrity.
Lindsay Lohan and Jake Paul charged by SEC
The latest to be embroiled in a scandal involving cryptocurrency is actress Lindsay Lohan, social media personality Jake Paul, and musician Soulja Boy, among others. They were charged by the Securities and Exchange Commission (SEC) in connection with Tronix and BitTorrent tokens. SEC has sued Justin Sun, the man behind Tronix and BitTorrent, for fraud.
What did they do?
According to SEC chair Gary Gensler, the accused celebrities promoted the tokens by hiding that they were paid for their tweets. This led the public to believe they had an unbiased interest in Tronix and BitTorrent. A total of eight celebrities were charged by the SEC. Everyone but Soulja Boy and musician Austin Mahone agreed to settle without admitting guilt. They paid over $400,000.
Madonna and Justin Beiber were named in class action lawsuit
In December, the list of defendants in a class action lawsuit included Madonna, Justin Bieber, Jimmy Fallon, Stephen Curry, and Kevin Hart, among others. The lawsuit accused the defendants of violating California's consumer protection statutes and federal securities laws by inducing investors to buy Bored Ape Yacht Club NFTs without disclosing that they were paid for their promotions.
Tom Brady was one of the biggest promoters of FTX
NFL legend and seven-time Super Bowl champion Tom Brady was one of the biggest promoters of the now-defunct crypto exchange FTX. The collapse of Sam Bankman-Fried-led FTX was unlike anything the crypto world has seen. A lawsuit filed in Florida alleges celebrity promotion by Brady and others drove the public to invest in unregistered securities sold by FTX.
Crypto assets are considered investment opportunities in the US
It is not unusual for celebrities to promote products. And when have we heard them disclosing how much they got paid for endorsing a certain product? So, what is the fuss when it comes to crypto? The difference lies in the nature of the product. Crypto assets are considered investment opportunities in the US. Therefore, celebrities are required to disclose their compensation.