The collapse of Sam Bankman-Fried’s FTX last year continues to cause reverberations, with the most recent being the filing of a class-action lawsuit against YouTube influencers who were vocal in promoting FTX to their followers. The plaintiffs want the court to award them damages worth $1 billion dollars.
Edwin Garrison is the leader of the plaintiffs, who filed their suit in Miami Division in Southern Florida on March 15, 2023. The suit alleges that the influencers actively promoted the cryptocurrency fraud executed by FTX, and that those influencers didn’t disclose that they were being compensated for their services.
The respondents listed in this suit include Tom Nash, Kevin Paffrath, Jaspreet Singh, Graham Stephan, Ben Armstrong, Andrei Jikh, Brian Jung, Erika Kullberg and Jeremy Lefebvre. All these are individuals who have YouTube accounts that they used to promote FTX; the suit also mentions the founder of talent management firm Creators Agency LLC, which was in charge of overseeing the promotion of the now-defunct crypto exchange FTX.
In the lawsuit, the plaintiffs describe those they are suing as individuals (influencers) who positioned themselves as actual consumers who were sharing their valuable, authentic experiences of the product with those who follow them on YouTube.
The seven people named as plaintiffs come from various countries around the world, and the common factor bringing them together is their purchase of what they say was an unregistered security that was, for personal financial motives, promoted by the persons accused in the lawsuit. The plaintiffs say the actions of the influencers were also geared at benefiting FTX as a company.
The lawsuit goes further to enumerate national as well as global categories of plaintiffs who suffered losses in some way due to the actions of the defendants. As such, damages in excess of a billion dollars are being demanded from the defendants.
It is interesting to note that the lawsuit points out that back in 2017, the U.S. Securities & Exchanges Commission (SEC) issued a warning to the effect that any individual found to be promoting what is later proved to have been an unregistered security risked being prosecuted for their failure to disclose that they were being paid or compensated to promote the said security. The suit adds that recent developments have shown that the SEC regards the products that FTX was offering as unregistered securities as evidenced in the cases they are prosecuting or investigating against different actors in the crypto space.
It now remains to be seen how this consolidated class-action matter is resolved by the court and how that decision will impact the crypto world and its different actors such as HIVE Blockchain Technologies Ltd. (NASDAQ: HIVE) (TSX.V: HIVE).
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