After SBF, Investors Targeting Larry David, Tom Brady and Other FTX Endorsers
bloomberg.com
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Meanwhile the investors in FTX almost assuredly had some idea on their internal processes and would have been aware of the lack of chief compliance officer.
There's a significant difference between a caterer and a high-profile celebrity endorsing something. You don't think there are people who joined FTX as a result of these promotions?
While I like Larry David, he has no business promoting financial products to consumers. In fact, I think it should be illegal for celebrities or "influencers" to promote any kind of financial products.
Now one can argue that it should be illegal for anyone to advertise for a product or be paid to say nice things about it (like the smiling guy wearing a lab coat while the screen says 4/5 dentists recommend whichever toothpaste), but otherwise I don't see why celebrities should be uniquely liable.
Given that, it makes no sense to go after any of the celebrities in this instance, since they did nothing wrong in particular except violate an abstract principle, not a law or regulation.
If no celebrities should ever endorse financial products (not sure I agree with this), then some regulatory body or legislative body should constrain us to that.
But to tell you the truth, that strikes me as pretty stupid, since this principle can be applied easily outside of financial concerns. The result, if applied correctly, would be that no celebrity should ever endorse any product whatever, since every product has massive, latent risk that would not be able to be reasonably known by any celebrity. Think recalls. Think contamination. Think unknown drug side effects. Think mechanical failure. Etc.
Go after the people who are responsible and who should know, not the incidental agents who just happen to be involved in some tragic fraud or malfeasance of which they knew nothing and could not have been expected to know. Massive misattribution of blame.
So is it the responsibility of the fool who uses social proof without doing their own due diligence, or is it the fault of the celeb accepting payment for the promotional work?
If they are just going after the celebs to claw back any earnings, which would be put back in the pot to compensate victims, that seems reasonable.
But to go after them as if they were co-conspirators seems quite unjust.
I do think, however, that the principle would have to be applied more generally and pertain to most if not all promotional work.
Practical difficulties aside, this might have the added benefit of highly discouraging celebrities to promote anything. I say benefit, because to my mind it's vacuous, tasteless, and toxic for celebrities to promote products. This goes to podcasters and YouTubers, as well. If I hear one more otherwise respectable person shill investments into Master Works rather than index funds...
Moreover, it's a major promotional video for FTX. He presumably would not have agreed to star in it if he didn't like it (or the money).
Neither of these options are likely to pay off in a lawsuit. Larry David and Tom Brady however just might settle whether you believe it's right or not.
They give weight to marginal or fraudulent enterprises and give dubious products and services credibility --thus there is some responsibility and if they cannot vet properly then indemnify themselves where someone else through premiums would establish whether it's viable or not.
You have a public company, licensed to operate by a government regulator, and you want to hold paid actors accountable?
FTX did not have a CFO. It would not have taken much due diligence to figure out that something seemed fishy.
The SEC and DOJ make prosecutorial decisions and therefore need to meet a high burden of evidence. All a celebrity (& their team) needs is a feeling that something doesn't seem right.
So, based on the contents of their endorsements, Larry David is probably in the clear (since he explicitly did not endorse FTX). OTOH, Tom Brady's ads stated that FTX was the "most trusted" and "most trustworthy" institution in crypto, so he appears to be screwed. And for a $30 million payday, he could definitely have afforded to conduct even a modicrum of due diligence.
Famously, Taylor Swift was approached about and endorsement and offered 9 figures...but turned it down after her team did due diligence.
Other celebrities endorsing other crypto scams have pled guilty and paid fines under this law, such as Kim Kardashian, Jake Paul, Soulja Boy, etc.
Remember, this was customer money. Anything they sent out the door belongs to the customers that are currently out of pocket. This is not investors complaining since their bet went to zero.
As for the others, if people listen to a football/movie/fashion/etc star for investment advice, I think they should know what to expect.
I'm sure he got paid well over $1M to say "meh FTX" or whatever it was.
So it depends on whether you think "endorsement" is "taking money to associate yourself with a company by appearing on video in their advertisement" or saying on the record "I endorse this company, I use their products, etc."
Most endorsements are now in the former category, although it does seem like modern podcasts also have explicit ones in the latter category too
10 million dollars, according to Michael Lewis in his recent 60 Minutes interview.
I also don't care that he endorsed them and don't think he's at all responsible for people losing money in crypto.
That was my first impulse, but then I realized that I would never do such a thing myself. And that really, the regulation should mainly be about protecting the interests of those that would. Adding a layer of bureaucracy and requiring promoters to due diligence, on the plus side it will help protect people, on the minus side it will cut into the margins of these celebrities and the industries around them, which could lead to the sector shrinking and worse entertainment. That tradeoff needs to be made with the people that stand to be affected the most in mind.
Promotors should be more responsible than the Regulators?
If it was obviously a fraud at the time, the police and SEC should have shut it down. Why expect some random celebrity to do more diligence and gatekeeping than the officials that license FTX?
If a product is legal to sell, and legal to advertise, then actors should not be held responsible.
FTX was in a legal gray area. They were using customer funds in part to make large campaign donations and influence the, at the time hotly debated, regulatory decisions about cryptocurrency.
The "random" celebrities were paid tens of millions of dollars, that's why.
It's a separate question about the failure of regulators and law enforcement. It turns out that more than one party can do something wrong.
The wallet was highly promoted by SBF and the entire Solana foundation. I provided them in depth information about it and those involved as well as methods by which they can identify and locate those individuals.
What if Tom Brady was given FTX stock or some cryptocurrency, publicly endorsed it, watched the value increase, then sold?
Caveat emptor, as P. T. Barnum used to say.