Celebrities Shilling Crypto Legal Exposure In Focus – The Hollywood Reporter

To the uninitiated, the world of cryptocurrency exists on the outskirts of traditional finance. But every once in a while, more people catch a glimpse. This year’s coveted commercial breaks during the Super Bowl fit the bill, as several now-infamous ads featured stars hawking crypto. Larry David appeared in a spot for FTX, as did Matt Damon and LeBron James in Crypto.com clips.

By showing up in the most premium real estate in all of TV, and partnering with some of Hollywood’s most trusted brand ambassadors, the crypto firms bought themselves an air of credibility on the path toward legitimacy. Or, at least it appeared they were on their way there, until FTX — one of the world’s top digital currency-exchange platforms that also issues its own token called FTT — collapsed when customers made a run on the exchange amid a months-long crypto sell-off. On Dec. 12, FTX founder Sam Bankman-Fried was charged and arrested for violations of securities laws, a month after he was sued in a proposed class action alongside stars who promoted the company. 

FTX account holders, in addition to those who bought now-worthless crypto from other issuers that filed for bankruptcy, are likely to recoup pennies on the dollar on their investments. FTX’s new chief executive John J. Ray III told a House committee Dec. 13, “We’re not going to be able to recover all the losses here.” They sit in line behind a host of creditors with higher priority. Now, new scrutiny is on the A-listers to whom FTX turned to launder its reputation. While they might not have knowingly committed fraud, they could be on the hook for promoting unregistered securities. “The people who have the most liability happen to be billionaires,” says Adam Moskowitz, who is representing FTX and Voyager customers in proposed class actions against the crypto exchange firms. 

Bankman-Fried leveraged the world of entertainment and celebrity to grow his businesses, lure in new crypto buyers and establish FTX as an island of legitimacy in a sea of scams. His aggressive marketing strategy featured partnerships with NBA teams, patches on Major League Baseball umpire uniforms and splashy TV ads of stars touting the exchange as a safe place to invest money.

“People generally hesitate when it comes to the unknown,” said former FTX U.S. executive Sina Nader, who led partnerships for the exchange, when speaking with The Hollywood Reporter for a story just over a year ago. “Working with trusted people and institutions, people will look and say, oh, if Stephen Curry, or Tom Brady, or Gisele, or Trevor Lawrence, or the entire MLB are comfortable with crypto and FTX, then maybe I can get comfortable with it too.” 

In a lawsuit filed Nov. 15, FTX account holders sued Bankman-Fried and stars who endorsed the platform, including David, and others like Tom Brady and Stephen Curry. They allege the company was a “Ponzi scheme” that used funds obtained through new investments to pay off old investments and maintain the appearance of liquidity. The suit claims that FTX’s interest-bearing accounts were securities, which would…