FTX influencers face $1 Billion class-action lawsuit over alleged crypto fraud promotion

A class action lawsuit led by Edwin Garrison was filed against "FTX influencers", primarily on YouTube, seeking $1 billion because they "promoted FTX crypto fraud without disclosing compensation." The lawsuit was filed March 15 in the Miami Division of the Southern District of Florida.

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 the promotion of FTX and the founder of the agency. According to the suit:

"Although FTX paid Defendants handsomely to boost their brand and encourage their supporters to invest, Defendants failed to disclose the nature and extent of their sponsorship and/or sponsorship deals, payments and compensation, or perform adequate due diligence ( if there were)".

The lawsuit describes the defendants as "influencers" who "present themselves as real-life consumers sharing authentic and valuable information with their followers."

The Moskowitz Law Firm represents the plaintiffs. The seven named plaintiffs are from various countries and all "purchased an unregistered security of FTX in the form of a YBA [yield-bearing account].” The lawsuit claims that the plaintiffs suffered damages by purchasing the "unregistered security" and that the defendants promoted it for the financial benefit of themselves and/or FTX. Global and national classes of plaintiffs were identified in the lawsuit, and constitute "thousands, if not millions, of consumers around the world, to whom YBA was offered and/or sold by FTX," he stated.

The defendants seek damages in “a sum greater than $1,000,000,000.00.”

Related: Binance.US, Alameda, Voyager Digital and the SEC: the ongoing court saga

The lawsuit contended that the United States Securities and Exchange Commission warned in 2017 that if yield-earning accounts are found to be securities, the individuals who promote them could be prosecuted for promoting an unregistered security or for failing to adequately disclose their payments and compensation. The question of whether that is the case has been "virtually answered in the affirmative through various regulatory statements, guidance, and actions issued by the US Securities and Exchange Commission and other regulatory entities," the lawsuit says.

Additionally, the lawsuit claims that the SEC has displayed a “consistent approach to cryptocurrency” and continues to discuss recent and ongoing cases involving the SEC and the cryptocurrency industry, as well as the Howey and Reves tests.

the suit is a consolidation from various class action lawsuits, according to the law firm. of the garrison the lawsuit was filed on November 15, 2022"and is the first FTX-related class action lawsuit filed in the country," the firm saying. Garrison is also a plaintiff in the class action lawsuit brought against alleged celebrity endorsers of FTX.