Investors Who Suffered Losses and Numerous Promoters Face Lawsuits
"Promotion Without Responsibility" vs "Investors' Own Judgment"
Famous figures who promoted cryptocurrencies, including Madonna and Kim Kardashian, have been collectively sued by investors who suffered losses.
On the 30th (local time), the Wall Street Journal (WSJ) reported, "Celebrities who promoted cryptocurrencies and non-fungible tokens (NFTs) have come under heavy fire from investors who incurred losses."
According to WSJ, the celebrities involved in the lawsuit include Madonna, who promoted the 'Bored Ape' NFT by purchasing it for about 700 million won last year; football player Tom Brady, who appeared in advertisements for the bankrupt cryptocurrency exchange FTX; and Kim Kardashian, who endorsed the EMAX cryptocurrency on Instagram.
These celebrities, among others, are reportedly facing civil lawsuits from investors who lost money in virtual assets as well as thorough investigations by regulatory authorities. The lawsuits aim to caution celebrities against acting as financial promoters for cryptocurrency companies without awareness of legal responsibilities. Through this, basic rules for future cryptocurrency promotions and legal standards for founders' liabilities in case of investment failures are expected to be established.
Thibault Nagy Jr., a lawyer handling cryptocurrency-related lawsuits, told WSJ, "Promoting a company and promoting the cryptocurrency issued by the company are different issues," adding, "Standards for lawsuits against celebrities will be established within the next few months." Sean Massen, a lawyer at Scott+Scott law firm with experience in filing multiple class-action lawsuits, explained, "Celebrities may be held accountable for promoting cryptocurrencies without awareness of legal responsibilities."
Cryptocurrency Promotion Overheats... Madonna "Buying Apes Enthusiastically"
In 2021, as the cryptocurrency craze surged, promotions using celebrities intensified. Cryptocurrency advertisements featuring celebrities notably filled the 'Super Bowl,' the world's largest sports event and marketing occasion.
In March last year, Madonna purchased one of the 'Bored Ape Yacht Club' (BAYC) series NFTs for about $570,000 (690 million won). At the time, Madonna was reported to be "buying apes enthusiastically," attracting attention.
In response, in December last year, a lawsuit was filed against NFT technology company Yuga Labs and six celebrities including Madonna, alleging violations of California consumer protection laws and federal securities laws. It was claimed that they failed to disclose that they were paid to promote and induced investors to buy 'Bored Ape' NFTs at excessively inflated prices.
Also, last year, Kim Kardashian posted about the EthereumMax EMAX token on her Instagram account and received $250,000 (about 360 million won) in return, leading to sanctions from financial authorities.
Regarding this, a class-action lawsuit was filed alleging collusion with others to deliberately inflate the value of the cryptocurrency. However, the U.S. District Court for California dismissed the lawsuit due to lack of evidence. The court acknowledged concerns that such actions could easily persuade millions of supporters to buy "snake oil" (products that deceive consumers) but ruled that "the law requires investors to act reasonably."
The defendants are also reportedly arguing that there is insufficient evidence that investors made investment decisions based on celebrity promotions. However, Tony Mullen, a lawyer at the law firm Rolland & Knight, told WSJ, "Promoting a specific brand of detergent to fans is a completely different matter from persuading them to invest their lifetime savings."
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