WT…FTX

Crypto-tation Management

I say Nespresso – you say, George Clooney. Whose smile is synonymous with Lancôme? Julia Roberts’. Johnny Depp: libel litigator, Dior endorser. Love and marriage, horse and carriage, celebrities and brands all go together; but when the brand hits the skids or the celebrity strays off the path of righteousness, reputations on both sides of the symbiotic relationship can crash.

Billions of dollars have been spent and reaped across a plethora of endorsed industries with the sweet smell of success emanating from deals for coffee, to scent, and everything in between. The new “crypto kid” on the block – embracing disruptors including the blockchain, digital currencies, crypto exchanges, and non-fungible tokens (NFTs) – is no different. Evidenced by spectacular gains and losses and similarly soaring celebrity successes and fantastic falls from grace, the crypto sphere has had its share of celebrity endorsers. However, as with any endorsement partnership, when prospective partners, both promoter and product, can find that they are in fact doing a dance that they had not anticipated.

Is the endorsement dance still worth the entry price? Brands seek the backing of celebrities to enhance their sales. As the celebrated Compare the Market spokes-meerkat Aleksandr Orlov would say, “Simples!” Slightly more academically, research has been undertaken on the “transfer effect,” which considers “the strategic advantages of celebrity co-branding to capitalize on celebrities’ influence.” Research from Miami University1 and the online experiment undertaken “confirmed the transfer of celebrity traits to brands; changes in brand belief and attitude were consistent with the valence of the celebrity’s traits.” Or, as Orlov the meerkat might put it, it appears that consumers who idolize celebrities and emulate their styles and behaviors buy the relevant brand to seek to buy into the lifestyle. Alice ate a magic cake in Through the Looking Glass and grew to enormous proportions; meanwhile, we, the consumer – subconsciously if not consciously – consume products to grow in stature and to become like the idols who endorse them.

The hero-effect puts zeros on the bottom line for brands. Celebrities, meanwhile, engage in the potentially Faustian pact of endorsement for their paychecks and because an association with a high-profile, highly valued and respected brand is seen to gild their already golden lilies.

As we have seen, both sides of the crypto-promotion Faustian pact can be damaged by an unfortunate endorsement choice if the brand bubble bursts. Celebrities may fall from their pedestals and tarnish the brands they have been paid to shine. Or they may themselves get trod upon by choosing a clumsy dance partner. Each partner may see their glittering prize of success tarnished with the debasing of their erstwhile treasured crypto companion, while many others may become the victims of both of them.

A spectacular example of a crypto catastrophe reads like an ABC of what not to do, featuring FTX and Sam Bankman-Fried (SBF). FTX is the cryptocurrency exchange rarely known by its other name, Futures Exchange, and SBF is its boss.

WT… FTX?

What happened with FTX? In this fast-moving world, events had moved at a pace between when I first put fingers to the keyboard and about word 2,000, let alone when I added “period” and hit “send” to my editor. Thus, even what was presumed “now” may prove to be out of date by the time of publication, while more accurate information is likely to be discovered.

FTX, once a Bahamas-based cryptocurrency exchange, is now a bankrupt company. FTX is an ex-exchange that provided a platform for selling and purchasing digital currencies, such as Bitcoin and Ethereum. It had been valued at $32 billion on a good day, but as good days are somewhat in the past, it is reported now to owe its creditors $3.1 billion.2

What of SBF? He was a new kid on the block of the also new crypto industry on the block. A tousle-haired baby-faced (former) billionaire, he was once a math and physics geek at the Massachusetts Institute of Technology. He became “…a major donor to Democratic Party candidates.[15][16] He was the second-largest individual donor to Joe Biden in the 2020 presidential election, personally donating $5.2 million,[17][18] and he donated $٤٠ million to Democratic candidates during the 2022 U.S. midterm elections.[19]”3

SBF also owned Alameda Research, an investment fund trading in digital currencies that traded on FTX. It was thought that the two entities were distinct from and independent of each other.

FTX and Friends

Somewhat of a modern messiah in the crypto world then, SBF drew attention and emulation. The softly glowing star quality attracted others, while those already spinning in their own celebrated orbit rushed to hitch their celebrity status to his crypto star.

Much of the alure for crypto happened during and post the COVID pandemic,4 when the world seemed like an episode of “Stranger Things,”5 turned upside down such that trying new-fangled things and buying new-fangled currencies did not seem quite so odd or risky to some as it might otherwise have done previously. If crypto was the latest new fad, then bet your bottom dollar – perhaps quite literally – that others were looking to cash in.

Famous figures, including the actor Larry David and National Football League quarterback Tom Brady, endorsed the FTX exchange. An advertisement featuring the distinctively sardonic actor saw Larry David’s dismissive character failing to see the merit in the wheel, the lightbulb or crypto.6 The commercial appealed to the persuasive fear of missing out (FOMO) and ended with the line, “Don’t be like Larry. Don’t miss out on the next big thing.” The next big thing for the actor, however, is likely the class action lawsuit brought against FTX, in which in which David is personally named for helping to nudge7 investors to engage with the exchange. One expects that the “Curb Your Enthusiasm”8 star will have had his own enthusiasm for crypto somewhat curbed.

Tom Brady is also named in the suit. His life has been in somewhat of a state of F(TX)luX. In February 2022, he announced his retirement from football. Not two months later, he “un-retired,” reportedly citing “unfinished business” with the sport.9 Later that same year came the announcement of a new partnership with the FTX exchange for an undisclosed amount in cryptocurrency.10 Glossy advertisements with Brady and his supermodel wife Gisele Bundchen followed, with snappy earworms encouraging viewers that they were “in” to crypto; punning on a potential “trade” across football teams, Brady proudly showed that he was keen to trade in crypto, and the millionaire heartthrob baller with the supermodel wife, quipped in the third advert that even he could “do better.”11

Yet while the ad coaxed that “the best are never done getting better,” encouraging fans to do better themselves and trade on FTX, things were about to get much worse for Brady. First came news of the end of his 13-year marriage. While the couple “lawyered up” consciously to uncouple, they were reported ultimately to have settled their separation amicably. However, whether or not the Bradys are lucky in love, they will need to be lucky, and skilled, in litigation, as they take their places as defendants in the FTX lawsuit.

Brands as well as individuals were happy to be seen in the fast-lane to success with FTX. In a press release in September 2021,12 Formula One racing team Mercedes-AMG Petronas was “delighted to announce a new long-term partnership with FTX.” The announcement served as an exchange of love letters, with SBF offering that FTX was “thrilled to partner with the reigning Formula One World Champions and current team point leaders, Mercedes-AMG Petronas, to continue amplifying our position as the leading global cryptocurrency exchange.” Meanwhile, team principal and CEO of Mercedes-AMG Petronas F1 Team, Toto Wolff, responded that it was “very excited to welcome FTX,” extolling their “innovative spirit and creative energy in such a rapidly developing global industry.” This, the announcement said, makes them “a well-matched partner in our own relentless pursuit of performance.”

However, in its relentless pursuit of performance, it appears that FTX suffered a severe engine fail and has crashed and burned, leaving casualties along the track. What exactly happened?

It all started in early November 2022 with a leaked balance sheet that revealed that the value of FTX CEO Sam Bankman-Fried’s trading company, Alameda Research, was bolstered heavily by a token created by its sister company, FTX, and not by independent assets such as fiat currency or other cryptocurrencies.The ensuing surge in withdrawals from FTX caused a liquidity crunch for the third-largest crypto exchange by trading volume, with US$6 billion of withdrawals made in just three.13

Still a little perplexed? Try this rather cleverly dumbed-down explanation by New York Magazine from its “Explain it to me like I’m… 5 years old” column: “A silly-haired wizard sold magic beans. The villagers loved it! Until they stopped believing in magic and demanded their money back, only to find that the wizard had already spent it.”14

In other words, in the brave new world of cryptocurrency, there was a good old-fashioned run on the bank. Once plucky depositors investing in the FTX exchange began to feel a little nervy; they turned from bullish to chicken and sought to withdraw their digital currencies. Chicken Little’s fear that the sky would fall as misplaced: but the fear of the spooked FTX depositors realized their very own fears as the bottom, and the top, fell out of FTX.

In the story’s next chapter, competing exchange Binance appeared to offer a lifeline with initial proposals by its CEO, Changpeng Zhao, to rescue FTX. However, following its due diligence, the deal was off. Binance sealed the deal for FTX’s reputational death when it tweeted about reports of “mishandled customer funds and alleged US agency investigations,” adding that “the issues are beyond our control or ability to help”.

With no bailout in sight, FTX was sunk. On November 11, 2022 FTX Trading Ltd and more than 100 related entities in the group filed for Chapter 11 bankruptcy protection. “This means that Alameda, FTX’s hedge fund, Singapore subsidiary Quoine, and other entities such as FTX (Gibraltar) Ltd, FTX Digital Assets LLC, FTX Europe AG, FTX Exchange FZE and many others are protected from claims. As a result, any court suit or arbitration claims made by investors against these FTX entities would likely be suspended in favour of the insolvency framework. Even if investors have a judgment sum or arbitration award against FTX, that could at best be a ticket to queue up in the insolvency process.”15

F(TX)alling From Grace

As FTX failed, SBF went from crypto messiah to pariah, and as he and FTX fell, the stars who had circled in his crypto orbit fell too. As a result, those who were keen to embrace the shiny new thing in the crypto sphere have had to take the rough with the smooth. A Washington Post article commented on the demise of FTX, citing the proposition in the class action brought against FTX that the celebrity status of its erstwhile endorsers “made them culpable for promoting the firm’s failed business model.” 16

CBS News reported further, citing Adam Moskowitz, the attorney leading the FTX class action, as he set out his take on the celebrity phenomena: “FTX were geniuses at public relations and marketing, and knew that such a massive Ponzi scheme — larger than the Madoff scheme — could only be successful with the help and promotion of the most famous, respected, and beloved celebrities and influencers in the world,” he said.” The article went on to confirm that “FTX did not reply to a request for comment.” 17

An endorsement relationship – like any other relationship – may begin with the sound of whispered sweet nothings, but it may end in raised voices and accusations, even if not immediately in a divorce petition. After the FTX fail, for example, Mercedes did not file for divorce straight away, but it did initiate somewhat of a trial separation. “As a first step, we have suspended our partnership agreement with FTX,” read its statement as reported by Reuters on November, 11 2022.18 “This means the company will no longer appear on our race car and other branded assets from this weekend. We will continue to monitor closely the situation as it evolves.” When one spouse mucks up and brings opprobrium on the family name, the other may want to disassociate themselves, quickly.

Queen of Christmas? King of Crypto?

Mariah Carey may be synonymous with Christmas, but she was never formally crowned the Queen of Christmas, having in December 2022 failed in her petition to trademark the phrase.19 Likewise, SBF may have made himself a high-profile figure in the world of crypto, with significant and widely publicised donations to political campaigns and committees,20 but his virtual crown as the King of Crypto was unceremoniously knocked off his head on December 12, 2022, as officers from the Bahamas Financial Crimes Investigation Unit arrested him at the request of the U.S. government.21 Far from facing a fun and festive season, SBF has been sent a hamper chock-full of less than tasty fayre. As reported in Coinbase,22 they included: charges from the United States Securities and Exchange Commission (SEC) of violations of the anti-fraud provisions of the 1993 Securities Act and the 1934 Securities Exchange Act; legal action by the Commodity Futures Trading Commission (CFTC) for violations of the Commodity Exchange Act; and indictments for alleged wire, commodities and financial fraud filed by the United States Attorney for the Southern District of New York.23 Important to remember that while he has expressed his regret for the fall of FTX,24 he has admitted that he had a “bad month,” and is embarrassed by the exchange’s failure on risk,25 he denies wrongdoing.

SBF, like anyone in the public eye, had a brand to build and a reputation to protect. He may have been trying some reputation rehabilitation in his attempts to manage the messaging of this catastrophe in the court of public opinion.26 According to Vermont Public Radio and its David Gura, while SBF’s lawyers have “have told him to keep quiet,” SBF – at the center of a massive corporate collapse – “is doing the opposite. He’s been trying to shape the public’s understanding of how his crypto empire imploded so quickly.”27 Appearing at the New York Times DealBook Summit at the beginning of December, he said, “I think I have a duty to explain what happened, and I think I have a duty to do everything I can to try and do what’s right.”28 That may work out for his reputational future in the long term, but his fate more generally and urgently, however, will be decided in the actual courtroom.

Rocking the Celebrity Relationship

A charismatic character can significantly bolster brands and it is important to find the right partners. The omnipresence of the internet and the rise of the influencer and brand ambassador has led to meaningful relationships between celebrities and offerings.

The New York Times reported the blurring of the lines from the days of yore when a celebrity was merely the “face” of the product to the modern phenomenon where the two are synonymous. Citing Andrea McDonnell, an associate professor of communication at Providence College, the newspaper reported on the tighter relationships between the product and the promoter: “It’s a two-way validation system…. The star becomes a stand-in for the brand, and the qualities of the brand mirror or enhance the qualities we associate with the star.”29

In many endorsement situations, we may wish to emulate our icons by clothing ourselves in their clothes, wearing their lipsticks, or watches, or using their golf clubs. Yet the New York Times article also reported on partnerships, which, by their nomenclature, moved the endorsement dial from celebrities as mere faces to being much more fundamentally involved: “Dakota Johnson, co-creative director and investor at Maude (sexual health and wellness products); Prince Harry, chief impact officer at BetterUp (employee coaching);… [and] Jennifer Aniston, chief creative officer at Vital Proteins (supplement).”30 If we love Jennifer Aniston’s clear skin and youthful looks, we might slather ourselves in a cream or a lotion to try be like her, and we may be more likely to invest in a jar of her product when we learn that she is not only the face of the brand, but also the brain behind it. Its Creative Officer is represented as “all in” with Vital Proteins and thus we are much more likely to have a crack at emulating our idol.

There is an additional issue with promoting crypto versus creams, tokens, and lotions. If you buy a hat because your fashion guru endorsed it but it turns out that it is just not you, so what? You have splashed a bit of cash, but if the cap does not fit, do not wear it. However, you invest in currency on the advice not of a professional financial adviser but your favorite influencer, you may be set to lose significantly more than your street cred.

Bringing Home the Bacon

An article in B2 – The Business of Business, noted an article written by actor Ben MacKenzie from “The O.C.,” urging his fellow thespians not to boost crypto in which he called “The Hollywoodization of crypto” a “moral disaster.”31 MacKenzie’s article accepts that, to a certain extent, the endorsement business is just another way to bring home the bacon. “So look, I get it. Everybody’s gotta make a living, even in showbiz. I’ve been in it for two decades now, and sometimes you find yourself doing weird things for money. I’m not a snob about that stuff. There’s honor in all honest work.” However, he points out the dangers given the lofty positions from which celebrities speak, tweet, and post. “While the notion that famous people are role models might be quaint now, our privileged lifestyles and conspicuous consumption can still seem aspirational to some. In short, what we talk about, and what we post about, can move units… what Kim Kardashian or Snoop Dogg posts about—that’s real estate that every marketing executive in the world would like a piece of, and they’re willing to pay enormously for it.”32

Mackenzie goes on, “And that’s fine by me, as long as they aren’t promoting the financial equivalent of Russian roulette.”33 But aye, there’s the rub – and certainly as far as the SEC is concerned, because if you invest in cryptocurrency hunting for fortune simply on the say-so of your dearest online boo, you may indeed be playing Russian roulette. You may face potential gains, but equally have to face down the potential of significant losses.

One other important issue, beyond either gentle encouragement or hard sell, is the extent to which the celebrities are backward in coming forwards about their relationships. Some celebrities appear friendly on screen – i.e., Rachel and Monica in “Friends”. Some actors are just as genuinely friendly off set, i.e., Jen and Courtney, and they are upfront about it, while others are pals onstage, i.e., “Sex and the City’s” Carrie and Samantha, but the “noises off” are much less friendly between actors Sarah J. Parker and Kim Cattrall. However, friends or foes, we know all about it.

Yet some celebrities and promoters are not so up front about their relationships with their endorsed products, or certainly not as up front about any payments that they may receive in exchange. In those cases, we the public may be being played. When emulating these stars involves cold hard cash rather than cold cream, the stakes are infinitely higher, and the SEC may have something to say about it.

The ABC of the SEC

A security is a fungible, negotiable financial instrument that holds some type of monetary value.34 Securities must be registered with the SEC. What amounts in the crypto space to a security and what does not is a minefield to tread with extreme caution. However, when the brave new world was first declared open, many rushed in.

The SEC issued guidance back in 2017, warning about the dangers of promoting securities, and reliance on those promotions.35 On its website – which admittedly may not be the usual reading of many an influencer, rapper or actor – it warned:

“Celebrities and others are using social media networks to encourage the public to purchase stocks and other investments. These endorsements may be unlawful if they do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.” It went on in a warning to the public, “The SEC’s Enforcement Division and Office of Compliance Inspections and Examinations encourage investors to be wary of investment opportunities that sound too good to be true. We encourage investors to research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons.”36

As a warning to those doing the promoting, it stated specifically:

Celebrities and others have recently promoted investments in Initial Coin Offerings (ICOs). In the SEC’s Report of Investigation concerning The DAO, the Commission warned that virtual tokens or coins sold in ICOs may be securities, and those who offer and sell securities in the U.S. must comply with the federal securities laws. Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion. A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws. Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers. The SEC will continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws.37

Concluding with a further warning to would-be buyers, the SEC statement warned:

Investors should note that celebrity endorsements may appear unbiased, but instead may be part of a paid promotion. Investment decisions should not be based solely on an endorsement by a promoter or other individual. Celebrities who endorse an investment often do not have sufficient expertise to ensure that the investment is appropriate and in compliance with federal securities laws. Conduct research before making investments, including in ICOs. If you are relying on a particular endorsement or recommendation, learn more regarding the relationship between the promoter and the company and consider whether the recommendation is truly independent or a paid promotion.38

Hitting Reputation Bottom

Despite the SEC’s best efforts, it seems that these anti-touting provisions were not completely clear to all. In 2020, actor Steven Seagal settled a claim brought by the SEC over his alleged failure to inform followers on social media that he was being paid – in cash and in Bitcoin – to promote Bitcoiin2Gen’s initial coin offering. While he was reported initially to have believed in the offering’s legitimacy, he later distanced himself from what the SEC considered to be a security. In a statement referring to the scheme, the SEC said,

These investors were entitled to know about payments Seagal received or was promised to endorse this investment so they could decide whether he may be biased. Celebrities are not allowed to use their social media influence to tout securities without disclosing their compensation.39

Without admission of liability, Seagal agreed not to promote any securities for three years and to pay more than $300,000 to the SEC. Seagal’s attorney Ivan Knauer noted the purely commercial nature of the relationship, saying that: “To him, it was simply a case of someone paying a celebrity for the use of his image to promote a product.”40 Knauer clarified that the “Above the Law” actor was not above the law. This example of the sensitivities in endorsing products from which individuals can lose significant sums shows the problem with crypto endorsement. Knauer told Law360 at the time of the settlement that “Mr. Seagal cooperated fully with the SEC’s investigation, and this matter is now behind him….He looks forward to continuing his life’s work as an actor, musician, martial artist and diplomat.”41

Kim Kardashian also hopes that her dealings with cryptocurrency are truly behind her. In October 2022, she was charged by the SEC for “touting on social media a crypto asset security offered and sold by EthereumMax without disclosing the payment she received for the promotion.”42 The SEC’s press release of October 3rd announced that she had “failed to disclose that she was paid $250,000 to publish a post on her Instagram account about EMAX tokens” which post “contained a link to the EthereumMax website, which provided instructions for potential investors to purchase EMAX tokens.”

$250,000 is not at all bad for a day’s work, especially considering that the post likely only took a matter of minutes to prepare and share; but in fact, the fee was not to be. The SEC statement confirmed that in agreeing to settle the charges without admission of liability “Kardashian agreed to settle the charges, pay $1.26 million in penalties, disgorgement [the approximate $260,000 promotional payment], and interest, and cooperate with the Commission’s ongoing investigation.” Whether this will ultimately cause damage to the bottom line of the Kardashian brand seems unlikely – it was a slight hit to her reputation.

That said, catching Kardashian certainly was a coup for the SEC. It used its press release as a warning to Joe Public. According to SEC Chair Gary Gensler:

This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors. We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.43

The SEC statement also served as a caution to celebrities who might want to follow Kardashian’s lead: “Ms. Kardashian’s case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities.”44 Meanwhile, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, noted that:

The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion. Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information.45

The SEC may have felt that it needed to burst out of the black and white words of an online statement46 and into the Technicolor of the screen. In its video available on Youtube,47 it reiterated its warning of the dangers of making investment decisions based solely on celebrity or influencer recommendations.48

The SEC may be hoping that its warnings will bring about a decline in celebrity endorsements similar to that which ensued back in 2017. Bloomberg had then reported that the SEC had seen a “pretty immediate drop-off” in celebrity endorsements following its caution. That warning followed the activities of celebrities who had promoted various initial coin offerings used to fund cryptocurrency projects.49 Boxer Floyd Mayweather had “talked up” Ethereum Max, with him and his team wearing promotional t-shirts for the currency. He, alongside former disc jockey DJ Khaled, was fined by the SEC for failing to let followers know that they were paid promoters for coin offerings.50 Neither admitted liability, but agreed to pay fines. Mayweather had tweeted, “You can call me Floyd Crypto Mayweather from now on.” The 2018 settlement with the SEC included his agreement “not to promote any securities, digital or otherwise, for three years.”51

When regular folk like us see our sports stars dripping in money due to activities in the crypto world, it is little wonder that we may want to drink from the same well. Yet we need to take proper, professional advice to avoid a severe financial malfunction. “Pump and dump” is the process whereby the value of a cryptocurrency is said to be significantly raised via celebrity endorsement and then dramatically dropped, leaving others out of pocket when demand is high. Mayweather, alongside Kardashian, former professional basketball player John Pierce, and EMAX executives Steve Gentile, Giovanni Perone, and Justin French are defendants in a California federal court class action claiming just this.52 In a statement to CBS News, EMAX has denied the claims, retorting that “This project has prided itself on being one of the most transparent and communicative projects in the cryptocurrency space.”53

Are SEC Warnings Good Enough?

Will the SEC’s warnings be heeded? Will the various class actions that are beginning to fill the courts and the media give us pause for thought before we dip our hands in our pockets? Or are too many of us unable to resist the temptation of buying into something endorsed, or seemingly endorsed, by our idols, whether we know that they have themselves, been bought or not? Are we at risk of simply being bored by the warnings…?

The defendants listed in a class action lawsuit in the United States Central District Court of California, Western Division54 reads like the cast list of the best Netflix show: Madonna, Paris Hilton, Jimmy Fallon, Justin Bieber, Gwyneth Paltrow, Serena Williams, Kevin Hart… as well as the Hollywood talent agent Guy Oseary, and the blockchain start-up company, Yuga Labs, Inc., famous for bringing us its Bored Ape Yacht Club NFT collection. The defendants are sued by plaintiffs bringing an action “on behalf of all investors who purchased Yuga’s non-fungible tokens (“NFTs”) or ApeCoin tokens (“ApeCoin”) between April 23, 2021 and the present (the “Relevant Period”), and were damaged thereby.”55

The complaint includes with a statement from the SEC, itself quoting an article in The Atlantic,

Celebrity endorsements – of a product, a brand, an idea, a haircut – have been around for ages, but they’ve become especially thick on the ground in recent years, as stars have developed their own direct-advertising channels on social media. For people with something to sell, a celebrity’s fan base provides an easy, responsible audience.56

The accusation in the suit is that:

The executives at Yuga and Oseary together devised a plan to leverage their vast network of A-list musicians, athletes, and celebrity clients and associates to misleadingly promote and sell the Yuga Financial Products…. Defendants’ promotional campaign was wildly successful, generating billions of dollars in sales and re-sales. The manufactured celebrity endorsements and misleading promotions regarding the launch of an entire BAYC ecosystem (the so-called Otherside metaverse) were able to artificially increase the interest in and price of the BAYC NFTs during the Relevant Period, causing investors to purchase these losing investments at drastically inflated prices.57

The celebrities, it is said, acted as promoters and solicited sales for Yuga securities to the public. Eager to follow in the glamorous footsteps of their heroes and heroines, consumers sought to snap up the tokens, sending their price sky-rocketing.

As reported in The Hollywood Reporter at the beginning of December 2022, “Trading volume of BAYC NFTs has dropped 93 percent from its height at launch. Similarly, the value of ApeCoin tokens has dropped 90 percent from its all time high.”58 Whether the brand value of those included in the complaint will similarly drop as a result of their association – whether the complaint is successful or not – remains to be seen.

Out of the Ashes…

The collapse of FTX has left bodies in its wake. The Yuga saga will likely do so as well. Individual investors have lost money. Endorsers have lost face. Yet has the crypto sphere lost its charm? With significant amounts of seemingly easy money to be made, that is unlikely. When the post-FTX, post-YUGA, post-current crypto catastrophe dust settles, new talent will emerge as pretenders to take the crown of the erstwhile crypto king, and others will no doubt genuflect to gain their own glittering pieces of crypto jewels.

Prostitution is referred to as the oldest profession. It can denote the offering of sexual services for a fee, or the offering of other talents for personal gain. Is crypto endorsement then, in fact, the newest profession? In this brave new world, there are products to be endorsed, money to be made, and brands to be bolstered ‒ and thus high-profile figures will continue to engage, legitimately or otherwise, knowingly or unwittingly being used, in the high-stakes game of promotion. While kings and subjects, celebrities and civilians alike may have had their fingers burnt in the crypto flame, there will inevitably be others willing to take the risk and try their hands at endorsements. Whether they will survive may depend on the hand that they are dealt in the crypto gambling game, as well as how they handle their own reputations as they sit down at the table.

Amber Melville-Brown is a partner and global head of the media and reputation practice at the international law firm Withersworldwide. Amber is a dual-qualified media specialist and crisis management lawyer, admitted to practice in both the courts of England and Wales, and New York.

Endnotes

1 https://scholarship.miami.edu/esploro/outputs/journalArticle/Meaning-transfer-in-celebrity-endorsement-and/991031660160302976.

2 https://www.coindesk.com/video/ftx-owes-dollar226m-to-its-largest-creditor-total-of-about-dollar31b-owed-to-top-50-creditors/#:~:text=FTX%20Owes%20%24226M%20to,Top%2050%20Creditors%20%7C%20Video%20%7C%20CoinDesk.

3 https://www.cbsnews.com/news/ftx-sam-bankman-fried-political-donations-2022/.

4 https://www.nytimes.com/2022/11/17/briefing/crypto-collapse-ftx.html.

5 https://www.netflix.com/tudum/articles/stranger-things-a-z-recap-seasons-1-3.

6 https://deadline.com/video/larry-david-super-bowl-ad/.

7 https://en.wikipedia.org/wiki/Nudge_theory.

8 https://www.hbo.com/curb-your-enthusiasm.

9 https://www.npr.org/2022/03/13/1086379798/tom-brady-return-nfl#:~:text=Tom%20Brady%20announces%20his%20retirement,with%20the%20New%20England%20Patriots.

10 https://www.sportspromedia.com/news/tom-brady-ftx-cryptocurrency-equity-endorsement-deal/.

11 https://www.youtube.com/watch?v=_aCGMyrFn-8.