Several individuals known for promoting virtual and digital tokens having connections to the now-closed FTX exchange are facing criticism after a class action lawsuit worth $1 billion was filed against them.
The increase in virtual and digital tokens has led to a decrease in social media users promoting several digital tokens and forums to their followers. Although, these users can be legally responsible if they do not disclose their economic links to the industries they promote.
In the U.S., the Securities and Exchange Commission has initiated measures against several well-known social media influencers who have endorsed cryptocurrencies without revealing their financial associations with the companies.
According to the Securities and Exchange Commission, these influencers breached securities regulations by endorsing cryptocurrencies without appropriate disclosures.
Pre-Promotion Checklist
Revealing information is extremely important for social media influencers, as their followers greatly value honesty and genuineness. If influencers neglect to disclose their financial connections, it could harm the reliance they have established on their followers and could lead to legal repercussions.
There are instances when social media influencers might have to be aware of the legal obligations for disclosure. Hence, influencers should know the legal prerequisites for disclosure and ensure they follow them.
Social media influencers who endorse cryptocurrencies should reveal any financial connections with the cryptocurrency company they endorse to prevent legal problems. This move involves including a disclaimer in their post or video description or verbally mentioning the affiliation in their video.
In addition, influencers must be open about the hazards associated with investing in cryptocurrencies. Since cryptocurrency investments are extremely unstable and can lead to considerable losses, influencers must ensure their followers know the risks and possible drawbacks of investing in cryptocurrencies.
Legal Action Directed Towards Social Media Promoters
A recent class-action lawsuit spanning seventy-three pages has targeted numerous social media users, specifically content creators who actively endorsed FTX but did not reveal their financial association with the now-defunct cryptocurrency platform.
The Plaintiff is pursuing damages exceeding one billion dollars, and the Lawsuit was initiated against YouTube content creators with a large following. According to the law firm’s representatives, the requested amount might increase to five billion dollars.
The legal case involves claims about deceiving customers, utilizing unjust and deceitful methods, endorsing unregistered securities, and secretly receiving undisclosed payments for promoting FTX.
Adopted Strategy
When questioned about the Plaintiff’s action plan, the law firm emphasized that FTX was headquartered in Miami, several FTX Brand Ambassadors resided in Florida, and Florida law would be applied to all harmed investors.
Adam Moskowitz, the primary representative, gave multiple public interviews to encourage affected individuals to step forward and receive a ‘free assessment of their case.’
Suspects Respond
Kevin Paffrath (Meet Kevin), who has more than two million subscribers, is one of the individuals mentioned in the Lawsuit. He recently spoke with Coffeezilla, a renowned investigative journalist. Although Paffrath considered reimbursing some of the money a charitable act, he denied the accusations of failing to reveal his connections with FTX in his videos.
Conversely, Ben Armstrong (BitBoy Crypto) pursued a slightly distinct approach to vindicate himself in the legal case.
Armstrong claimed he never spoke to anyone as a marketing agent or at FTX. He further emphasized that some claims against him were false, and he had enough evidence to prove himself innocent.