February 9, 2023

Tampa Bay Buccaneers quarterback Tom Brady. (Photo by Mike Ehrman / Getty Images)

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The state’s securities regulator is looking into whether the sports stars and other celebrities may have violated any laws while endorsing and promoting crypto exchange FTX before its bankruptcy. But lawyers say any liability can be difficult to prove.

Tampa Bay Buccaneers quarterback Tom Brady and Golden State Warriors point guard Steph Curry were among a handful of celebrities who appeared in commercials and advertisements for FTX or tweeted positively about the company. In one commercial, Brady calls a group of friends to see if they are “in” on FTX. A Super Bowl ad this year was based on Brady accidentally spreading a rumor that he wanted to trade, only to reveal he meant trading cryptocurrencies.

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The ads have caught the eye of state securities regulators, who are now looking into whether celebrities were helping sell securities and, if so, whether they adequately disclosed that they were asked to do so, says Alabama director Joe Borg. How was the compensation given to do. Securities Commission. Borg said more than a dozen states are involved in the investigation, led by Texas. bloomberg news informed of Texas Inquiry earlier this week.

Representatives for Brady and Curry did not respond to a request for comment.

The investigation potentially adds to the legal woes for the celebrities, who were also sued earlier this month in a proposed class action. Bahamas-based crypto exchange FTX declared bankruptcy earlier this month and is now under investigation by multiple federal agencies for possible misuse of customer funds.

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While Brady and other endorsers make an attractive target for lawyers looking to recover funds for clients who lost money, it can be difficult to prove any liability or whether they broke the law, lawyers say.

Howard Ehrenberg, an attorney with Greenspun Murder in Los Angeles, says, “Celebrities who are paid simply to read scripts and who endorse products usually aren’t liable for any unfortunate consequences for someone who who actually uses the product.” “It is going to be difficult to draw a causal link between celebrity and harm.”

Assuming the celebrities didn’t say something they knew was untrue, says Chicago-based securities attorney Andrew Stoltman, they will likely prevail in the class actions brought against them.

Stoltman said securities regulators could pursue endorsers on the grounds that they’re promoting securities, although it’s unclear whether they would have authority to bring a case if they promoted only FTX, rather than a specific product.

That said, “I don’t think there’s any question that Tom Brady and these other celebrities need very good civil counsel,” Stoltman said. “At a time when a crypto platform gets caught in a flameout of over $10 billion, they’re also going to be looking at deep pockets, and there aren’t too many deep pockets left.”

This wouldn’t be the first time regulators have hit up celebrities for cashing in on crypto endorsements. In 2018, the Securities and Exchange Commission settled charges with former boxing champion Floyd Mayweather Jr. and music producer DJ Khaled for failing to disclose payments they received to promote an initial coin offering. couple Agreed Paying dishonor, penalty and interest without accepting or rejecting the findings.

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TV star and businesswoman Kim Kardashian settled with the SEC earlier this year over allegations that she promoted a crypto token without disclosing payments she received. He paid $1.26 million without admitting or denying the findings. Kardashian decided to put the matter behind her and avoid a “prolonged dispute” with her lawyer Told In a statement at the time of settlement.

In both of those cases, the celebrities were promoting specific crypto tokens rather than trading platforms.

Prior to FTX’s bankruptcy filing, the Texas securities regulator disclosed that it was investigating FTX US and founder Sam Bankman-Fried over whether the firm was selling unregistered securities. FTX said at the time that it was in talks with the regulator.

Write to Joe Light at [email protected]