Australian-based crypto influencer Tony Nash caught up in $US1b FTX class action lawsuit
But FTX’s growth strategy also relied on influencer relationships with the likes of Mr Paffrath, Mr Nash, Graham Stephan, Andrei Jikh, Brian Jung, Jeremy “Financial Education” Lefebvre, Ben “BitBoy Crypto” Armstrong and Erika Kullberg, all of whom are named in that Florida -based class action as well as talent management firm Creators Agency.
According to the class-action lawsuit filed last week in the Southern District of Florida, the US Securities and Exchange Commission defines these “yield-bearing accounts” as unregistered securities.
“What differentiates influencer marketing from other types of celebrity marketing is that it is perceived as more authentic and trustworthy because because of an influencer’s rapport with their fans, their endorsements are not dismissed as fake and sponsored endorsements,” the lawsuit states.
The aggrieved investors allege that the YouTube influencers promoted FTX products that they said were “guaranteed” to generate returns, which lawyers claim were unregistered securities.
“For that, the defendants are liable for the plaintiffs’ losses, jointly and severally and to the same extent as if they themselves were the FTX entities,” says the lawsuit, which lists damages in excess of $1 billion.
Nash did not respond to questions.
FTX collapsed spectacularly last November following revelations that Bankman-Fried had allowed more than $8 billion in customer deposits as trading capital for his hedge fund Alameda Research, which lost much of its money through risky trades and venture capital investments.
Hundreds of thousands of FTX customers are now clamoring to get their deposits back via a series of bankruptcy claims around the world, including Australia, where more than $42 million is said to have been collected through two locally incorporated entities called FTX Australia and FTX Express.
In recent months, former executives at both FTX and Alameda Research have testified that Mr Bankman-Fried instructed them to deliberately construct technical back doors that would allow Alameda an “unlimited line of credit” from FTX customer deposits.
Bankman-Fried was later arrested and charged with a number of financial crimes, to which he has since pleaded not guilty. His criminal trial is due to take place in October.
While evidence is still being gathered, bankruptcy attorneys have recovered more than $5 billion in cash, cryptocurrencies and investment assets that will be distributed to creditors over the coming years.
After the FTX collapse, the Florida-based class action alleges that Nash, Mr Paffrath and Mr Stephan all scrubbed their YouTube channels with video clips supporting FTX and praising Mr Bankman-Fried.
In their place, they have posted apology videos acknowledging their significant role in promoting FTX and causing billions of dollars in investor losses.
An influencer, Ben “BitBoy” Armstrong, has the page denied any relationship with FTX and has notified followers that he plans to counter sue.
But according to court documents on Monday, lawyers representing the class action allege Armstrong “began harassing” them after the initial filing with “endless phone calls, tweets and emails” and “abusive and threatening posts on Twitter, YouTube and other social media.” media”.
Mr Armstrong told Australian Financial Review that a class action was unlikely to get anyone’s money back.
“I am the only person affected by the lawsuit who not only has never taken any money from FTX in the form of a sponsorship or an affiliate, I have never spoken to a single employee of FTX about such a deal,” Armstrong said.
High-profile crypto-influencers have become famous in recent times. Earlier this week, Balaji Srinivasan, former chief technology officer at Coinbase and general partner at venture capital firm Andreessen Horowitz, bet fellow Twitter user James Medlock $2 million that bitcoin’s price will jump from the mid-$20,000s to $1 million within 90 days.
The bet was broadcast on Twitter and sparked a flurry of coverage and speculation, leading to a reprise of Srinivasan’s earlier comment suggesting “FTX is a preview of government failure”.
