Celebrities face legal trouble from NFT campaign

Celebrities, like everyone else, only want to be in on what’s cool and new. In the last five to six years it has been cryptocurrency and NFTs. There’s a new frontier in celebrity endorsements for products, but it’s not as simple as just holding up a favorite beer and saying it tastes good. Blockchain carries risks for everyone, and when you’re famous, the costs of taking those risks can get out of hand very quickly.

The list of 17

Seventeen famous names found out in early August 2022. It was then the consumer watchdog group Truth in advertising (TINA) sent letters to a diverse group that included A-listers such as DJ Khaled, Eminem, Gwyneth Paltrow and Tom Brady. Each letter was tailored to the recipient, but included the following statement:

While TINA.org does not currently address a specific deceptive marketing issue related to such posts, we have found celebrity NFT campaigns to be an area rife with deception, including but not limited to a failure to clearly and conspicuously disclosing the promoter’s material connection with the approved NFT company, as well as the omission of other material information, such as the risks associated with investing in such speculative digital assets, the financial harm that may result from such investments, and the personal benefits that the promoter may obtain. by virtue of the campaign(s).

The letter informed celebrities that they were required to disclose a financial connection to any NFT gathering they promoted, then singled out Justin Bieber and Reese Witherspoon. TINA was on the connection between former inBetweeners NFTs and the latter’s connection with World of Women NFTs.

The letter sent to Reese Witherspoon was lethargic. The linked tweets the actor had posted about the World of Women NFTs in 2021 and 2022 stated that the Federal Trade Commission (FTC) is “requiring social media influencers like Ms. Witherspoon clearly and distinctly discloses when they have a financial, personal or other material relationship with a brand.”

Witherspoon, the letter said, “markets an NFT company (in which she has a personal stake) without ever disclosing the risks associated with investing in such speculative digital products, and the financial harm that may result from such investments.” This lack of transparency, TINA’s letter concluded, “is particularly important in light of Ms. Witherspoon’s widespread popularity among fans of varying degrees of financial experience.”

Like an August 8th BuzzFeed Report As for the notices pointed out, even celebrities who buy a Bored Ape out of pocket are “essentially pumping the value of their own investment” when they do something to promote the collection, like posting a photo on Instagram.

TINA’s warning letter was an important tip for stars who don’t want to run afoul of the Federal Trade Commission. TINA’s warnings have often preceded the FTC’s filing of legal action, known as a “Notice of criminal offenses relating to misleading or unfair behavior around endorsements and certificates.” Most celebrities would rather not be hit with the kind of significant fines the government can impose for unfair or deceptive practices.

Seth Green’s BAYC saga

A few months before the bulk of TINA’s letter went out, actor, writer and co-creator of “Robot Chicken” Seth Green. discovered another danger of that blockchain life: There are legal gray areas galore.

Green had bought some Bored Apes (BAYC), including #8398, which he called Fred Simian. Not long after he went on a shopping spree, Green fell for an old-fashioned phishing scam– he responded to a message which eventually prompted him to enter his OpenSea login information and in no time some of his most valuable NFTs were transferred to the wallet of a ‘Mr Cheese’.

The actor was desperate to get his property back, track down Mr Cheese’s likely Twitter account and publishes public messages calling for Fred’s return. It turned out that Green wasn’t just running a Twitter account for Fred Simian — by acquiring the copyright to Fred with the purchase, Green built an entire mixed animation and reality sitcom, “White Horse Tavern,” around the character.

Finally, blockchain records indicate that an account linked to Green’s known purchase history was used to buy back Fred Simian, this time for nearly $300,000.

Had Green taken the case to court, it would not have done so been easy for him. The blockchain was designed for anonymous transactions, and it can be difficult enough for law enforcement to investigate online crime in the first place – add in cryptocurrency security and the result can be a bit of a nightmare even for seasoned cyber experts.

Seth Green’s Bored Ape ordeal was perhaps a bit more straight forward than concerns over celebrity disclosures that put the likes of Gywneth Paltrow and Jimmy Fallon in the FTC’s crosshairs. Non-famous people buy NFTs and trade crypto daily, often confronting phishing attacks. What happened to him happens to many consumers—the The FTC reported in June this year that fraudsters had taken in a billion dollars since January alone.

Talking about your reputation

TINA’s warning letter and Seth Green’s adventure in BAYC land are just two aspects of cryptocurrency complexity. Famous people face other challenges when they get into crypto in one form or another – challenges that have more to do with PR than the law. During Super Bowl LVI in February 2022, Matt Damon and Larry David appeared high profileexpensive advertisements for crypto.com and FTX exchange.

Both places received a lot of notice on social media at the time, but in June 2022 crypto winter began. Damons and Davids became fodder for bitter jokes from those who lose money in the tank market and sources to schadenfreude for crypto-skeptics.

The ads seemed to disappear from regular rotation pretty quickly, so it’s likely that the damage to the reputations of both stars was minimal in the long run — and after all, Matt Damon and Larry David were obviously paid spokespeople.

In a recent article for Act 360lawyers Amy Mudge and Lauren Bass from the national law firm Baker & Hostetler LLP discussed Truth in Advertising’s letter to celebrities about their lack of disclosures. Mudge and Bass acknowledged that while TINA’s letter reflected frustration with “the lack of aggressive enforcement of individual influencers,” the FTC is likely taking the right approach to these issues on its own. The authorities have published guidelines for influencers in simple, non-legal language and has generally taken an educational approach rather than aggressively issuing warnings.

Mudge and Bass write that the FTC’s “focus on education rather than reprimand is arguably a smarter use of the agency’s limited resources. This approach has helped raise awareness of responsibility as well as general compliance by brand marketers, influencers and even social media platforms.”

The lawyers still have some free advice for celebrities who are still interested in an NFT collaboration.

“Whatever product or medium such endorsement takes place in,” Mudge and Bass write, “remember to follow federal guidelines regarding endorsements and to clearly and distinctly disclose the relationship between the parties along with the potential volatility of any investment in digital assets.”

Be clear about it if you are paid to tell others to invest in new, still unknown assets. The crypto world is shady enough as it is.