FTX influencers face $1B class action lawsuit for allegedly promoting crypto scam
A class action lawsuit led by Edwin Garrison has been filed against “FTX influencers,” mostly on YouTube, seeking $1 billion for “promoting FTX crypto scams without disclosing compensation.” The suit was filed March 15 in the Southern District of Florida, Miami Division.
Kevin Paffrath, Graham Stephan, Andrei Jikh, Jaspreet Singh, Brian Jung, Jeremy Lefebvre, Tom Nash, Ben Armstrong, Erika Kullberg and Creators Agency LLC are named as respondents. The defendants are eight YouTubers, the talent management company that handled the promotion of FTX and the agency’s founder. According to the suit:
“While FTX paid Defendants handsomely to push their brand and encourage their followers to invest, Defendants did not disclose the nature and extent of their sponsorships and/or endorsement deals, payments and compensation, nor did they perform adequate (if any) due diligence. “
The case describes the defendants as “influencers” who “present themselves as real consumers who share authentic and valuable information with their followers”.
The Moskowitz law firm represents the plaintiffs. The seven named plaintiffs are from different countries and all “purchased an unregistered security from FTX in the form of a YBA [yield-bearing account].” The lawsuit alleges that the plaintiffs suffered damages by purchasing the “unregistered security” and the defendants advanced it for the financial benefit of themselves and/or FTX. Global and domestic classes of plaintiffs were identified in the suit and represent “thousands, if not millions , of consumers globally, to whom FTX offered and/or sold YBAs,” it claims.
The defendants are seeking damages in “an amount in excess of $1,000,000,000.00.”
Related: Binance.US, Alameda, Voyager Digital and the SEC – the ongoing lawsuit
The lawsuit alleges that the United States Securities and Exchange Commission warned in 2017 that if yield-bearing accounts are found to be securities, people promoting them could be prosecuted for promoting an unregistered security or failing to disclose their payments and compensation. The question of whether that is the case has been “practically answered in the affirmative through various regulatory pronouncements, guidance and actions issued by the US Securities and Exchange Commission and other regulatory entities,” the lawsuit says.
In addition, the suit claims that the SEC has demonstrated a “consistent approach to cryptocurrency” and goes on to discuss recent and ongoing cases involving the SEC and the crypto industry, as well as the Howey and Reves tests.
The lawsuit is a consolidation of several class actions, according to the law firm. Garrison’s lawsuit was filed on November 15, 2022 “and is the first FTX-related class action filed in the country,” the firm said. Garrison is also a plaintiff in the class action lawsuit filed against alleged celebrity endorsers of FTX as well.
