Ten YouTube and social media promoters are facing a class action lawsuit filed by a group of investors seeking more than $1 billion in damages for the deceptive promotion of FTX.
According to an objection filed on March 15 in the Miami District Court, the group claims that the popular influencers- Ben Armstrong, Graham Stephan and Tom Nash, among others- played a major role in the FTX disaster. As per the plaint, these promoters lured millions of followers into investing with FTX by sharing financial advice and actively promoting the exchange’s yield-bearing accounts (“YBAs”) without disclosing the nature and scope of their sponsorships or conducting due diligence.
The plaintiffs further claimed that all the defendants admittedly endorsed and promoted the sale of the FTX YBAs. Still, none of them disclosed in any of their YouTube and other social media posts that they were paid by FTX tens of thousands of dollars to millions to hype the “deceptive FTX platform.” As per the plaint, this clearly violated the U.S. Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC) and various federal and state regulations.
FTX was a centralized cryptocurrency platform which specialized in derivatives and leveraged products. It filed for bankruptcy protection in Nov 2022 after a bank run following an admission by its then CEO Sam Bankman-Fried “SBF” that the company didn’t have sufficient assets in reserve to meet customer demand.
Following Sam’s disclosure, the plaintiffs lost assets held in their accounts literally overnight as FTX imploded. In the following months, SBF and other top-ranking FTX and Alameda officials were charged with numerous counts of fraud and money laundering (among other things). At least three of SBF’s cohorts have pleaded guilty to conspiracy and other criminal charges relating to FTX’s scheme to defraud its investors.
In the wake of the exchange’s collapse, entities that promoted FTX and its products, such as Kevin O’Leary and Stephen Curry, increasingly came under scrutiny. On several occasions, however, O’Leary defended his relationship as a paid spokesperson for FTX, insisting he, too, was a victim.
Some of the mentioned promoters have since taken down all media posts linked to FTX. On March 16, Kevin Paffrath, one of the nine defendants, responded to the lawsuit saying that he would pay back some of the proceeds from FTX promotion as a charity, noting that he is not responsible for his audience’s losses.