Finance YouTubers who promoted the failed cryptocurrency exchange FTX are now facing a $1 billion lawsuit from victims who lost money following the collapse of disgraced CEO and Democrat megadonor Sam Bankman-Fried.
Fortune reports that a class action lawsuit brought against several YouTubers is raising concerns about the morality of the actions take by influencers in promoting their sponsors’ goods and services.
A lawsuit filed on March 15 claims that a number of influencers were paid to promote FTX, a cryptocurrency platform that failed in November 2022, leaving customers with losses that some have estimated to be worth up to $8 billion. The plaintiffs, from the U.S., Canada, the UK, and Australia, are seeking more than $1 billion in damages from the YouTubers and an influencer agency, alleging that the “defendants did not disclose the nature and scope of their sponsorships and/or endorsement deals, payments and compensation, nor conduct adequate (if any) due diligence.”
FTX founder Sam Bankman-Fried (second on left) is led away in handcuffs by officers of the Royal Bahamas Police Force in Nassau, Bahamas, on December 13, 2022. (MARIO DUNCANSON/AFP via Getty Images)
The lawsuit claims that the influencers played a “major role” in the FTX scandal and names seven plaintiffs who invested in FTX Yield Bearing Accounts. It also alleges that without their support and “hype,” the cryptocurrency platform would not have reached such heights. It adds that influencers took “undisclosed payments ranging from tens of thousands of dollars to multimillion-dollar bribes.”
YouTubers Graham Stephan, Andrei Jikh, Jaspreet Singh of “Minority Mindset,” Brian Jung, Jeremy Lefebvre, Tom Nash, Ben Armstrong, and Kevin Paffrath, who has 1.87 million subscribers to his channel “Meet Kevin,” are among the defendants listed in the lawsuit. Creators Agency and its founder Erika Kullberg are also mentioned.
Some of the defendants have denied the allegations, with Armstrong telling news outlet Decrypt that he had “never spoken with anyone at FTX or as a marketing agent acting on their behalf. Not once. So the allegations against me are 100% false and it will be extremely easy to provide evidence of this.”
In a video titled “Being Sued,” Paffrath addressed the accusations head-on. He called SBF the “most obvious criminal” and sympathized with anyone who lost money in FTX. He went on to ask: “What role, if any, do promoters play?”
Paffrath presented a hypothetical question: In the event that he were a real estate agent and received a call from a prospective home buyer, he might connect them with another agent who ultimately sold them a house. Would he be held responsible as the first point of contact if that house were to sink into a sinkhole, drastically decreasing its value?
“It’s like a spectrum, who’s responsible?” Paffrath asks. “The more we go away from who’s truly responsible the less responsibility there really seems to be. The lawsuit is essentially alleging that those folks, the people who suggested FTX, are responsible for fraud in any way at FTX. That’s like saying the [real estate] agent who referred you to another agent is responsible for your home, all the way down chain, falling into a hole.”
In recent years, the use of influencers in product and service promotion has come under increased scrutiny due to several high-profile cases. This most recent lawsuit follows those against celebrities promoting products, including Tom Brady, Madonna, and Gwyneth Paltrow.
The lawyer for the plaintiffs is Adam Moskowitz, who is also familiar with the broader FTX situation. Moskowitz was the attorney who filed similar lawsuits against NFL legend Tom Brady, Brady’s ex-wife, supermodel Gisele Bündchen, and nine other celebrities.
In an interview with the Washington Post, Moskowitz said, “You have very rich people we all love telling us that they checked this out, and it was okay. Why shouldn’t they be held responsible? It seemed like a lot of investors were getting hurt and no one was really looking out for them.”
The Federal Trade Commission (FTC) stated in a report released in 2019 that it was “imperative” that influencers disclose sponsored content and that it would take enforcement action against those who did not. According to the report, influencers may be held accountable for any exaggerated or deceptive statements made in sponsored posts.
The FTC advises influencers to disclose when they are being paid to promote a good or service in its rules for influencers. However, there has been uneven enforcement of these rules, and many influencers have neglected to make these disclosures.
Read more at Fortune here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan