Lots of celebs sued over FTX – only Taylor Swift asked the right question
Football star Tom Brady was there, as was his then-wife, supermodel Gisele Bundchen, as well as basketball star Shaquille O’Neal and tennis player Naomi Osaka. They all advertised the crypto exchange FTX founded by Sam Bankman-Fried – and are being sued after their spectacular bankruptcy.
Only one was apparently smarter than the other celebrities: Because Taylor Swift was supposed to be an advertising face for FTX. In 2021, the crypto exchange offered the pop icon $100 million to sponsor her tour, the Financial Times reported in late 2022.
However, the deal never materialized – and now it’s clear why. Before signing the contract, Swift is said to have asked a simple question that saved her from being associated with FTX. She wanted to know from the crypto exchange representative what products were being traded there. According to Adam Moskowitz, one of the attorneys who brought a class action lawsuit against prominent FTX testimonials, in an episode of cryptoPodcast “The Scoop”.
“Can you assure me these are not unregistered securities?” Swift asked. FTX obviously couldn’t do that. A slimmed-down version of the advertising deal, in which, among other things, she was supposed to advertise the sale of tickets as non-fungible tokens (NFT) to her fans, did not materialize either. Swift was obviously correct in her caution. In a December 2022 complaint, the US Securities and Exchange Commission classified FTX’s native digital token, FTT, as a security that has not been properly registered.
Moskowitz’s law firm is demanding more than five billion dollars in damages from various celebrities. The accusation: They are said to have not checked FTX’s offer carefully enough before they participated in “offering and selling unregistered securities in the form of high-yield accounts”.
Unlike Swift, the then celebrity couple Brady/Bduchen agreed to the FTX advertising deal in 2020: Brady as a brand ambassador, Bummel as a consultant for the company’s environmental and social initiatives. As part of the deal, they are said to have received Bitcoin stakes in the crypto exchange. Grand Slam winner Naomi Osaka also signed a long-term advertising contract with the crypto exchange and is said to have received – now worthless – company shares and digital currencies in return. Basketball star Shaquille O’Neal also promoted FTX and, like his celebrity peers, is now a target of Moskowitz’s claim for damages — even though he’s tried for months to evade service of the lawsuit.
The FTX bankruptcy is a debacle for the crypto industry in the US and has fueled the debate about more regulation of crypto assets. Customers of the crypto exchange are sitting on billions in losses. Founder Sam Bankman-Fried is expected to face fraud allegations in October 2023, with a maximum of 115 years in prison. The FTX founder is accused, among other things, of misleading investors and embezzling customer money on a large scale. Shortly before bankruptcy, Bankman-Fried is said to have transferred billions of dollars in customer funds to his hedge fund Alameda Research to pay off debts.
The question of whether certain tokens should be rated as securities is at the center of the SEC’s current dispute with various crypto companies. For example, certain staking services violate securities laws from the perspective of the Securities and Exchange Commission. The crypto exchange Kraken has therefore already discontinued its staking service in the USA.
A landmark court case between the SEC and Ripple has been going on for around three years. The Securities and Exchange Commission accuses the company of trading in unregistered securities. In essence, this is also about the question of whether the XRP cryptocurrency issued by Ripple falls under the responsibility of the supervisors. The SEC wants to rate them as a security and not as a commodity.
