Opinion: Are Celebrities to Blame for the Fall of FTX?
This past February, the Los Angeles Rams played the Cincinnati Bengals in Super Bowl LVI, and, while many people watched the game for the football, many others watched it for the commercials. One commercial that particularly stood out was that of Larry David rejecting a number of inventions throughout history, such as the wheel, the lightbulb and, more recently, cryptocurrency. Specifically crypto as sold through the exchange, FTX.
At the time, the commercial was meant as comedy. “Don’t be like Larry!” it declared. “Don’t miss out on crypto!” With recent events and FTX’s fall from grace, though, the commercial seems more prophetic.
Larry David was not the only celebrity to tout FTX. Just a few months earlier, in September 2021, Tom Brady, quarterback of the NFL’s Tampa Bay Buccaneers and his now ex-wife, supermodel Gisele Bundchen, appeared in a commercial encouraging their friends to use FTX. Other celebrities who appeared in FTX’s commercials or endorsed the company include: Stephen Curry of the Golden State Warriors; Trevor Lawrence of the Jacksonville Jaguars; Shohei Otani of the Los Angeles Angels; tennis champion Naomi Osaka; former baseball player David Ortiz; former basketball player Shaquille O’Neal; and Shark Tank shark Kevin O’Leary. FTX even became the official crypto sponsor of Major League Baseball with umpires wearing an FTX patch on their uniform. It has the naming rights to a Formula One racing team, and Miami-Dade County renamed the home of its Miami Heat to the FTX Arena, with the company’s logo on the building, the basketball court, and the Miami Heat’s jerseys.
This seemed to have all been largely viewed as a company using celebrities to market it services – until early November, when FTX, the world’s third-largest cryptocurrency exchange, filed for bankruptcy. FTX experienced, essentially, the equivalent of a bank run once a report from CoinDesk raised concerns about founder Sam Bankman-Fried’s company’s undisclosed leverage and solvency. As of this writing, Bankman-Fried has been arrested in the Bahamas and charged with multiple crimes, including fraud and conspiracy. He was extradited to the United States in December to face an eight-count criminal indictment.
Since FTX’s collapse, at least three lawsuits have also been filed, including a class-action suit filed in a Florida federal court alleging that Bankman-Fried and most of the celebrities named above conspired to commit fraud by creating a crypto scheme to take advantage of unsophisticated investors. The plaintiff is being represented by Adam Moskowitz and David Boies, the lawyer who represented the U.S. government against Microsoft in the 1990s. With FTX and its more than 100 affiliates bankrupt, they are largely shielded from these lawsuits. The celebrities, however, are not.
As we have discussed before, the SEC’s main interest seems to lie more in lining its coffers than actually gathering proof of the situation. In that case, celebrities, with their deep pockets and high status, make easy targets. As reported by Bloomberg, John Reed Stark, former chief of the U.S. Securities and Exchange Commission’s Office of Internet Enforcement, said, “A lawsuit against celebrities will generate a ton of money, because they will all settle. It’s one thing to make your fans buy your T-shirt with your face on it. It’s another to tout something that causes them to lose their life savings.”
Why, though? If a fan buys a T-shirt with Tom Brady’s face on it, is Brady responsible for the quality of the T-shirt? McDonald’s has featured everyone from Michael Jordan to Destiny’s Child in their ads. If I eat at McDonald’s and get sick, can I sue these celebrities? For most people, this would probably be seen as ridiculous. The SEC, however, does not think so in its case.
Fraud, according to Black’s Law Dictionary, is “a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment.” If the SEC properly investigates FTX and discovers that Tom Brady did, in fact, intentionally mislead his fans, then absolutely he should be sued to the fullest extent of the law, but, again, it appears that the SEC is not interested in this investigation. It is only interested in the fact that these celebrities, as Stark said, will all settle.
Then, along those lines, where does it end? Will the networks who aired the commercials be sued? How about Miami-Dade County or Major League Baseball? How far will the SEC go?
If a bank robber uses a getaway driver, the driver is also charged with a crime. He knowingly assisted the robber in a crime. If the bank robber uses a taxi, and the taxi driver has no knowledge of the crime, is he charged as well? Or is he an unknowing victim in the crime?
One of the more ironic parts of the entire situation is the previously mentioned Larry David Super Bowl commercial. In the commercial, Larry declines using FTX. It is only through the text copy that the commercial says, “Don’t be like Larry.” So, is Larry David actually encouraging people to use FTX? “There’s enough celebrities to choose from,” Stark said, as reported by Bloomberg. “I’d probably leave him off, so as not to muddy the waters.”
In the U.S., we love to sue, and no one is more sue-happy than the U.S. government, a massive entity that has the ability to use its endless resources to extract money from anyone. As a lover and supporter of our country, I do not believe that this is the way our Constitution was meant to be enforced. The SEC, I believe, should be concerned with protecting investors and those who are unknowingly a part of these alleged schemes – even if those people happen to be wealthy celebrities.
What are your thoughts? Do you believe that Tom Brady and others should be included as part of this lawsuit? How have you been affected by the SEC and its enforcement-first approach? Email me at Publius.Connect@gmail.com and tell me. Thank you to everyone who continues to reach out and share your stories. We must continue to monitor and work to better our industry to ensure that everyone has access to a wide range of opportunities.
Editor’s note: The author of the preceding article is a chief executive officer in the financial services industry, who, for fairly obvious reasons, elects to share his thoughts on this subject anonymously. The DI Wire does not normally publish articles that do not disclose the author. In this instance, however, we have allowed it given the nature of the piece, the importance of open discussion and varying viewpoints, and the fact that we have personally confirmed Publius’ identity.
The views and opinions expressed in the article are those of the author and do not necessarily reflect the views of The DI Wire.
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