A handful of YouTubers famed for their personal finance expertise are being chased hard for more than $1 billion by victims who lost their fortunes in Sam Bankman-Fried’s FTX.
The finance influencers are facing a class action lawsuit claiming they were paid “handsomely” to push the FTX brand prior to its collapse, following similar cases brought against celebrity endorsers like Tom Brady, Madonna and Gwenyth Paltrow.
FTX collapsed over a 10-day period in November 2022 with its CEO –commonly referred to as SBF—now on house arrest ahead of a trial in October—charged with orchestrating a yearslong fraud in which he used billions of dollars of FTX customer funds for personal expenses and high-risk bets through the exchange’s sister trading house, Alameda Research.
He pleaded not guilty to the allegations in January.
It is unclear how much customers lost in the FTX scandal—though some place the figure at around $8 billion—and there is no timeline for when depositors could get their cash back.
In the meantime, they’re going after the people they feel lead them astray.
A class action lawsuit was filed to the United States District Court’s Miami division on March 15 and viewed by Fortune.
It names seven plaintiffs from across the U.S., Canada, the U.K. and Australia who all purchased FTX Yield Bearing Accounts.
They are suing eight YouTubers, an influencer agency and its founder for their losses, claiming the “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 document claims that influencers played a “major role” in the FTX scandal, saying the crypto platform wouldn’t have risen to such heights without their backing and “hype”.
It adds that influencers took “undisclosed payments ranging from tens of thousands of dollars to multimillion-dollar bribes”.
Among the defendants named in the lawsuit, some have vehemently denied they ever accepted cash for their positive take on the company at the time.
Others have sought to distance themselves from the company and its issues by saying they never gave out personalized financial advice. Among the defendants is Kevin Paffrath, known by his 1.87m YouTuber subscribers for his channel ‘Meet Kevin’.
In a video posted to his platform on Friday, Paffrath addressed the allegations head-on in a video titled: ‘Being Sued’. In the video he said he feels “so terribly” for anyone who lost money in FTX, adding that SBF is the “most obvious criminal”.
He goes on to ask: “What role, if any, do promoters play?”
The self-proclaimed financial analyst posed a hypothetical question: If he were a real estate agent and had a call from a potential house buyer, he could put them in touch with another agent who eventually sold them a home. That house could then fall into a sinkhole—drastically reducing its value—but as the first point of contact, would he be liable?
“It’s like a spectrum, who’s responsible?” Paffrath asks. “The more we go away from who’s truly responsible the less responsibility there really seems to be.
“The lawsuit is essentially alleging that those folks, the people who suggested FTX, are responsible for fraud in any way at FTX.
“That’s like saying the [real estate] agent who referred you to another agent is responsible for your home, all the way down chain, falling into a hole.”
He continues: “Ultimately, people have to put on their big boy pants.
“Why does a promoter have to guarantee the results of something they’re promoting?”
‘We’re sorry’
Paffrath has been named alongside a raft of other finance creators: Graham Stephan, a former real estate agent who worked for Selling Sunset’s Oppenheim Group, Andrei Jikh, Jaspreet Singh of ‘Minority Mindset’, Brian Jung, Jeremy Lefebvre, Tom Nash and Ben Armstrong are all named as supposedly taking payment for promoting the brand.
Also named is Creators Agency and its founder Erika Kullberg.
All of the defendants were approached by Fortune for comment –Paffrath added he had nothing to say beyond his video and Twitter updates.
No other defendants responded to contact, however, Armstrong previously told news outlet Decrypt he had: “Never spoken with anyone at FTX or as a marketing agent acting on their behalf. Not once. So the allegations against me are 100% false and it will be extremely easy to provide evidence of this.”
Many of the creators have addressed the controversy around FTX on their YouTube channels—some apologizing, others trying to keep their viewers up-to-date with the ongoing case.
In a video titled ‘Let’s Talk about FTX’ posted four months ago, Stephan tells his 4.2m followers: “As much as I trusted the information I was given, I was wrong and I’m sorry. This type of behavior is not something I ever would have expected.
“I do my best to research and vet everything that comes my way and this one I did not see coming. I’ve also personally used them as an exchange because of how trusted they were in the industry.”
‘Why shouldn’t they be held responsible?’
Adam Moskowitz is the attorney representing the plaintiffs in this case, but is familiar with the wider FTX situation.
Moskowitz, of the Moskowitz Law Firm, was the lawyer who brought similar claims against NFL legend Brady, Brady’s supermodel ex-wife, Gisele Bündchen, and nine other celebrities.
In an interview with the Washington Post, Moskowitz said: “You have very rich people we all love telling us that they checked this out, and it was okay. Why shouldn’t they be held responsible?
“It seemed like a lot of investors were getting hurt and no one was really looking out for them.”
Regarding the more recent case, Moskowitz told BuzzFeed: “Influencers are paid, just like all other promoters, and thus must be held accountable. They are paid so much because they play an important role today with social media, in making financial decisions.”
Moskowitz Law Firm did not immediately respond to Fortune’s request for comment.
This story was originally featured on Fortune.com
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Source: https://finance.yahoo.com/news/finance-youtubers-promoted-ftx-now-161015315.html