- A class-action lawsuit accuses social media influencers, including Erika Kullberg, Ben Armstrong (BitBoy), and Kevin Paffrath (Meet Kevin), of promoting collapsed crypto exchange FTX without proper disclosure of compensation.
- The SEC and upcoming EU regulations require promoters to disclose conflicts of interest, including remuneration details, to avoid market manipulation and legal consequences.
- BitBoy, one of the defendants, plans to countersue the plaintiffs, claiming no contact or dealings with FTX.
The cryptocurrency world has recently been shaken by a high-profile class-action lawsuit accusing multiple social media influencers of promoting the now-collapsed crypto exchange FTX without proper disclosure. The plaintiffs in the case argue that these influencers actively promoted FTX to their millions of followers without adequately disclosing the nature and extent of any payments or compensation they received.
The Accusations and Defendants
The lawsuit, filed on March 15th, 2023, accuses a group of social media influencers, including Erika Kullberg, Ben Armstrong (also known as BitBoy), and Kevin Paffrath (also known as Meet Kevin), of promoting FTX without adequately disclosing their compensation. The plaintiffs are seeking class-action status for the lawsuit, which would allow more individuals affected by the influencers’ alleged actions to join the suit.
According to the lawsuit, some defendants, like Paffrath, Graham Stephan, and Tom Nash, have removed FTX-related content from their YouTube channels and posted apologetic messages instead. In one such letter, Paffrath is quoted as saying,
“Yes, I used to be sponsored by FTX. That is a disgrace. And it’s a scar. And it sucks. If I could go back, I would change it because people got hurt because of that. I feel so terrible about that. People got hurt because of FTX, and it’s a disgrace.”
Ben Armstrong (BitBoy), one of the defendants in the lawsuit, has recently announced his intention to countersue the plaintiffs. Armstrong claims that he never had contact with anyone at FTX and never had an affiliate link from the failed cryptocurrency exchange. He believes the lawsuit will allow him to prove that he never had any dealings with FTX and has expressed confidence that he will “roast these Low IQ plebs and their lawyers” in his countersuit.
Regulations and Previous Cases
In the United States, the Securities and Exchange Commission (SEC) has established rules requiring securities promoters to disclose conflicts of interest, including the nature, amount, and source of any remuneration they receive. In 2022, the SEC charged TV celebrity Kim Kardashian $1.26 million for unlawfully promoting a crypto asset. The upcoming EU Markets-in-Crypto-Assets bill will also authorize promoters who fail to disclose compensation with market manipulation.
This case is not the first time FTX has been linked to celebrities and influencers facing legal issues. A separate FTX-related lawsuit previously targeted stars like Tom Brady and Gisele Bündchen for promoting the exchange.
This high-profile lawsuit serves as a reminder of the importance of proper disclosure in cryptocurrency promotion. Influencers, celebrities, and other promoters need to be transparent about their connections to the platforms and projects they endorse to maintain the trust of their followers and comply with regulatory requirements. Failure to do so can result in severe legal and financial consequences, as demonstrated by the ongoing FTX-related lawsuits.
