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Larry David had never appeared in a commercial — at least until 2022 when he debuted in a Super Bowl ad as part of a campaign for cryptocurrency platform FTX in a spot titled “Don’t Miss Out.” In it, he takes on his Curb Your Enthusiasm persona as a skeptic who travels through time and scoffs at inventions until he’s pitched FTX as a safe and easy way to get into crypto. “Ehhh, I don’t think so,” he says. “And I’m never wrong about this stuff. Never.”
The ad ends with a title card that states, “Don’t be like Larry. Don’t miss out.”
Later that year, FTX collapsed. The fallout included investors suing David, who was allegedly paid $13 million for appearing in the commercial, and other big names who endorsed the company.
Most claims in that lawsuit against David and a host of celebrities accused of illegally promoting the crypto exchange were dismissed on Wednesday, when a federal judge found that they didn’t intend to deceive consumers. While they were “uninformed, negligent, or even reckless,” U.S. District Judge K. Michael Moore concluded that the endorsers aren’t liable for investor losses because they didn’t have prior knowledge of FTX’s fraud.
The case — stemming from one of the most visible instances of financial fraud in U.S. history — concerns whether power brokers of the entertainment world, including athletes, supermodels, comedians and internet personalities, can be held liable for leveraging their fame to promote what some argue are unregistered securities.
The proposed class action, filed in 2022, alleged that FTX was a Ponzi scheme that fraudulently shuffled customer funds between its affiliated entities. It accused celebrity endorsers of aiding the exchange’s fraud.
Named in the complaint: Shohei Ohtani, Stephen Curry, Tom Brady, Gisele Bundchen, Shaquille O’Neal and Naomi Osaka, among others, as well as talent management firm Creators Agency, which promoted the exchange. They all appeared in ads and events for FTX and didn’t disclose that they received equity in the company in exchange for serving as brand ambassadors. In one commercial, Curry repeatedly denies being cast as an expert in cryptocurrency but says “I don’t need to be. With FTX I have everything I need to buy, sell, and trade crypto safely.”
Included in the dismissal were alleged violations of state securities, consumer protection, unfair competition and false advertising laws. “In the extensive list of promotions, advertisements, and statements, Plaintiffs have not provided any details related to Defendants’ alleged scheme to engage in knowingly false or deceptive practices, other than that Defendants promoted the FTX products in exchange for a substantial compensation package,” Moore wrote.
On the issue of intent to deceive, investors argued that celebrity endorsers were “exposed to red flags of fraud.” They also stressed that promoters knew they were using their fame to encourage people to make risky financial decisions based on uninformed recommendations.
For a claim accusing celebrities of conspiring with FTX to solicit purchases of what investors argue are unregistered securities, the court concluded that the endorsers can’t be found liable for “merely receiving payments and other monetary benefits in exchange for their promotional content.”
Moore offered investors another chance to fix their dismissed claims, though they’ll need to present stronger evidence that the celebrity promoters had knowledge of FTX’s fraud but still continued to promote its platform.
Some claims were allowed to proceed. They include violations of Florida and Oklahoma securities laws.
The issue of whether FTX products and services constitute unregistered securities remains contested.
Boosting crypto and crypto exchanges was a lucrative play for some. Shark Tank star Kevin O’Leary, also a paid ambassador to FTX, has testified before the Senate Banking Committee, telling them FTX paid him an $18 million to promote the exchange, including $3 million to cover taxes, $1 million in FTX equity (now “most likely worthless,” he said), and $10 million in crypto tokens held in FTX wallets (“I have written them off to zero,” he told the committee).
A-list promoters of crypto and other digital assets already have run into legal trouble — a key consideration in civil suits alleging fraud. In 2022, the Securities and Exchange Commission charged Kim Kardashian for endorsing on Instagram EthereumMax without disclosing a $250,000 payment she received for the promotion. She settled the case for $1.3 million. Floyd Mayweather Jr. and DJ Khaled have resolved similar suits filed by the SEC over failing to disclose payments they received for promoting investments in an initial coin offering.
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