A class-action suit led by Edwin Garrison has been filed against “FTX influencers,” mostly on YouTube, seeking $1 billion because they “promoted FTX crypto fraud without disclosing compensation.” The suit was filed March 15 in the Southern District of Florida Miami Division.
Kevin Paffrath, Graham Stephan, Andrei Jikh, Jaspreet Singh, Brian Jung, Jeremy Lefebvre, Tom Nash, Ben Armstrong, Erika Kullberg and Creators Agency LLC were named as respondents. The defendants are eight YouTubers, the talent management company that handled promotion of FTX and agency’s founder. According to the suit:
“Though FTX paid Defendants handsomely to push its brand and encourage their followers to invest, Defendants did not disclose the nature and scope of their sponsorships and/or endorsement deals, payments and compensation, nor conduct adequate (if any) due diligence.”
The suit describes the defendants as “influencers” who “present themselves as real-life consumers who share authentic and valuable information with their followers.”
The Moskowitz Law Firm is representing the plaintiffs. The seven plaintiffs named are from various countries and all “purchased an unregistered security from FTX in the form of a YBA [yield-bearing account].” The suit claims the plaintiffs suffered damages through purchasing the “unregistered security” and the defendants promoted it for the financial benefit of themselves and/or FTX. Global and national classes of plaintiff were identified in the suit, and make up “thousands, if not millions, of consumers globally, to whom FTX offered and/or sold YBAs,” it claimed.
The defendants are demanding damages in “a sum exceeding $1,000,000,000.00.”
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The suit held that the United States Security and Exchange Commission warned in 2017 that if yield-bearing account are found to be securities, persons promoting them could be prosecuted for promoting an unregistered security or failing to properly disclose their payments and compensation. The question of whether that is the case has been “practically answered in the affirmative through various regulatory statements, guidance, and actions issued by the U.S. Securities and Exchange Commission and other regulatory entities,” the suit said.
In addition, the suit claimed the SEC has shown a “consistent approach to cryptocurrency,” and went on to discuss recent and ongoing cases involving SEC and the crypto industry, as well as the Howey and Reves tests.
The suit is a consolidation of several class actions suits, according to the law firm. Garrison’s suit was filed on November 15, 2022, “and is the first-filed FTX-related class action filed in the country,” the firm said. Garrison is also a plaintiff in the class action suit filed against alleged celebrity endorsers of FTX as well.