Below is my column in the Hill on the lawsuits against Tom Brady and other celebrities over commercials for the now bankrupt crypto-currency company FTX. Apparently, what football tore asunder, FTX has joined again. Tom Brady and Gisele Bundchen are now co-defendants . . . and this time neither should be legally at fault.
Here is the column:
Patriots football fan Michael Livieratos is doing something that once would have been considered a sacrilege in New England: He is suing former Patriots quarterback Tom Brady. Livieratos, 56, filed a lawsuit seeking unspecified damages from Brady and “Shark Tank” co-host Kevin “Mr. Wonderful” O’Leary for their marketing of FTX and crypto currency.
Livieratos is essentially arguing a quarterback sneak ruined him after he invested virtually his life’s savings into FTX before its collapse. Putting aside his decision to base financial decisions on commercials made by an athlete, Livieratos’ lawsuit raises difficult questions over the liability of celebrities who become paid spokespersons for companies.
Brady is not alone; other celebrity endorsers are being sued, too, including his ex-wife, supermodel Gisele Bundchen.
There is no question that celebrities can sell out their fans by pushing products based on little knowledge or competency. However, the question for consumers is whether being a chump is the same as being a victim.
Livieratos told the Washington Post that “as a New England Patriots fan my entire life, you can imagine the influence that Tom Brady would have.” One can certainly imagine how a celebrity could prompt you to buy a car to look as cool as, say, Matthew McConaughey. However, few of us would bet our life’s savings on his financial advice. Indeed, if my Lincoln turned out to be a lemon, I would not blame McConaughey that the car did not prove to be “my sweet spot.”
Indeed, McConaughey personifies the problem in these lawsuits. He says a handful of words in every commercial, and virtually nothing about the Lincoln’s capabilities. In one, he simply grins before falling backwards, fully clothed, into a pool. You had to look closely to know he was selling cars — McConaughey was selling McConaughey, and the car was merely an add-on.
No one thought McConaughey took apart the car or compared other cars before driving away a truckload of money for the commercials. The question is whether one should assume Brady did any more research before telling people to take the plunge into crypto currency.
Yet, according to the complaint, O’Leary and Brady “promoted, assisted in, and actively participated in” FTX’s “offer and sale of unregistered securities.” He is accused of “aggressively marketing” the allegedly “deceptive” practices of FTX.
Brady, along with his ex-wife, took an equity interest in FTX last year and agreed to donate millions of dollars to FTX’s effective altruism mission. Notably, it appears that Brady and O’Leary may have lost money on the company as well.
An earlier class-action named Sam Bankman-Fried, Tom Brady, Gisele Bundchen, Stephen Curry, Golden State Warriors, Shaquille O’Neal, Udonis Haslem, David Ortiz, William Trevor Lawrence, Shohei Ohtani, Naomi Osaka, Lawrence Gene David and Kevin O’Leary as defendants.
The class-action alleges that “some of the biggest names in sports and entertainment have either invested in FTX or been brand ambassadors for the company. A number of them hyped FTX to their social media fans, driving retail consumer adoption of the Deceptive FTX Platform.”
Litigants argue that these celebrities helped shore up a “house of cards” operated by a “Ponzi scheme where the FTX Entities shuffled customer funds” to maintain the fraud.
States like Texas also are investigating Brady and others for their role in the allegedly fraudulent company.
Brady has hired Latham and Watkins to defend him in these lawsuits.
I am highly skeptical of the theories of liability. There is no evidence that these celebrities knowingly said anything that was false. These commercials also present a different issue from actor Ryan Reynolds pitching Mint Mobile as an owner; he is not just pitching but producing the product.
Celebrities routinely pitch products, from hair gel to hamburgers. They read from scripts, and few would believe they are experts in the products they shill.
These commercials clearly include a personal endorsement that they are good and proper. Tom Selleck can be seen nightly on television pitching AAG with the enthusiasm of a carnival barker: “And let me tell you something: I wouldn’t be here if I thought reverse mortgages took advantage of any American senior. Or worse, that it was some way to take your home.”
There is no indication that AAG is fraudulent, or that Selleck is wrong in claiming that “I believe I know what’s what” about reverse mortgages. However, even if Selleck were to shrug off his “what’s what” as a “whatever” at some later date, his credibility — not his liability — should be the issue.
Nevertheless, some celebrities have settled analogous cases in the past. In 2018, the Securities and Exchange Commission (SEC) pursued former boxing champion Floyd Mayweather Jr. and music producer DJ Khaled for their roles in pitching initial coin offerings. They agreed to pay profits, penalties and interest connected to their promotions.
Likewise, the SEC reached a settlement with TV star and businesswoman Kim Kardashian this year over her promotion of the crypto token EthereumMax (EMAX) without disclosing the payment she had received. She paid $1.26 million without admitting any fault.
For Kardashian, the key difference is tripping the wire of a securities product as opposed to a simple product. Most products fall under the U.S. Federal Trade Commission’s (FTC) Endorsement Guidelines. That only requires “simple and clear language” showing that a commercial pitch is part of an “ad” or “sponsored” feature.
Notably, Kardashian labeled her EthereumMax post as an “ad,” but the SEC views a crypto asset as a security, not just another product. Under SEC rules, a celebrity promoting a crypto-asset security must disclose the nature, source and amount of compensation received in exchange for the promotion.
Kardashian captures the lunacy of celebrity endorsements. The Kardashians are the celebrity Slurpees of popular culture, the zero-nutritional-value entertainment option. They are a family that became famous by claiming to be famous without any appreciable skill or value other than being celebrities.
For someone to take investment advice from Kim Kardashian is the ultimate example of a fool and his money being soon parted. However, whose fault is it when you make Kardashian or Brady your financial adviser on the basis for a 30-second commercial?
We live in a celebrity-dominated culture. Despite all of our progress as a species, more people are likely to know and follow the advice of Kim Kardashian than the Dalai Lama. Indeed, few of us want to imagine the Dalai Lama in Lululemon yoga pants, and I doubt it would lead to a buying frenzy.
Ultimately, however, celebrities sell themselves — and the rule for consumers remains “caveat emptor,” or “buyer beware.”
Jonathan Turley is the Shapiro Professor of Public Interest Law at George Washington University. Follow him on Twitter @JonathanTurley.
The commodity sold by these celebrities is the goodwill they have acquired by virtue of their celebrity status. A certain responsibility should attach to using one’s fame and goodwill to sell a product. The intention by lending one’s celebrity status is to induce people to purchase the item or cryptocurrency based on the trust generated by their celebrity status. People who relied on the endorsement of the celebrity should rightfully be upset at the violation of their trust when the product or cryptocurrency turns out to be worthless.
“People who relied on the endorsement of the celebrity should rightfully be upset” that they are lemmings.
This:
“We live in a celebrity-dominated culture.”
overrules this:
“few would believe they are experts in the products they shill”
in a country where “thought” has been replaced by “feel” until America’sDoctor aka BigTony does innumerable TV appearances advising policy because he ‘feels’ something.
So, victims, yes, because they have allowed themselves to be conditioned as overly-emotive chumps that can never feel good for long, if at all, and are too fragile to consider not to mention correct the problem, in an age when nearly everyone is walking around with a database that can make phone calls.
A pump-and-dump perception in a culture of baseless opportunists modeling success.
I think that the product that they were hawking, a security (or commodity), does distinguish this case from an ad for a Lincoln or a snack food. The celebrities probably would have been wiser to stick with regular products and not venture here. In particular, O’Leary can be differentiated from the others because of his frequent appearances on CNBC where he strives to be seen as a financial guru. He in particular should know better. The public needs protection from celebrities touting securities.
I agree with the Kardashian reasoning but thought that it should have been broader than just a failure to disclose the payment she received.
Interesting that you brought up the Selleck ads. I find those particularly grating and pushing the line in advertising. I think that financial products have to be treated differently from other products because they can have an enormous impact on a buyer when the buyer makes a bad decision.
Seniors have suffered losses as a result of such mortgages in the past. Someone seeing/hearing those ads and being swayed by his assurances that he wouldn’t be involved in those ads if they were bad is likely to be in poor financial condition and doesn’t have the money to consult with an attorney about whether this will harm them. Their judgment may not be the best; perhaps they are close to desperate and don’t know where to turn. They could easily be taken advantage of and should be protected from parasites.
The SEC probably kept the Kardashian reasoning narrow because Gensler was in hiding at the time. He has since decided that he does have the power over crypto as the head of the SEC as a result of the FTX failure. See WSJ today for an interesting article on the matter.
Who cares about these people? Utterly boring legal analysis.
Here’s one of the defendants, saying “never” to FTX (the whole ad is hilarious):
Speaking of people being famous for being famous (Kardashians), I first heard that concept in relation to Vanna White on the Wheel of Fortune. Ms. White was involved in litigation over a concept that was recently featured on this blog — the right of publicity. She sued Samsung in the 1990s for running an ad which featured a robot with a wig, meant to look like Ms. White from the back, but when it turned around it was clearly an old-fashioned mechanical robot. The federal appeals court actually bought White’s theory that Samsung’s robot had impersonated her and thus violated her right of publicity. Geez, talk about killjoys.
Ronald Reagan, John Wayne, Lucille Ball, Humphrey Bogart, Sammy Davis Jr and others appeared on TV ads selling cigarettes.
In some of t those ads back then, some celebrities also said “cigarettes are good for you” and if you smoked their brand [Kent] that “you were of above average intelligence” (since only smart people watched their show with ads).
Can we sue the families of Reagan, Ball, Bogart, Davis and others? What they did was arguably worse than Brady.
There were once professional stock experts – giving professional investing advice – that were telling millions of viewers to invest in Enron. This is the company that made up names from the movie “Star Wars” in order to embezzle investors’ money.
None of these experts did their due diligence. At the time wise investors, like Warren Buffet, refused to invest in Enron because they didn’t understand their balance sheet.
This example of Enron is a far worse case. Professional NFL football players would be great at giving advice on how to throw footballs or football strategy.
None of the Enron cheerleaders (professional investment pros) were held liable for not doing their due diligence, so how can you blame a football player?
Whoo boy. These are the perils of celebrity, and anybody stupid enough to trade their autonomy and humanity for momentary glory and absurd ruches likely gets about what they deserve. Though the case is important, it has to make me wonder about 21st century values. If this were an Instagram ‘celebrity’ that is famous for showing their naked behind ad nauseam on the ‘gram’ to great effect, would we be having this conversation? Context matters, we focus on the wrong strata, even though they are subject to the same law as everyone else, and Brady comes from a different time. I am not saying it’s ok, but there are a whole lot more factors being thrown about today, even if by the letter of the law they shouldn’t be, and wether we like it or not, that is where where we are. And it’s worth noting, I am not a lawyer, my wife is; What you get from me is exactly what you would get from me on a jury of peers. I am the one that actually wants to parse out points and delay the rest of the jury being able to just go home and surf Facebook because I still think these things are important. Yep. I am that annoying a**hole that will keep you on jury duty until a fair decision is reached. That you all don’t care is tragic to me. The 21st century in America is broken, and i hope not beyond repair. Your kids are a ****ing joke, and the future is actually a burden WE will carry, and we will, because we care, not theirs, because you have raised them to be the weakest generations the earthe has seen in the entirety of history.
A whole lot of typos in there, sorry. Forgive me for bad typing and if you read, take that into consideration. I love this forum, and I guess the Twitter experiment was a failure. I come here for accuracy, minus the trolls, of course. This may very well be one of the last American blogs with a shred of truth, and whatever the Professor does henceforth, I wish him godspeed. I would have loved it if the JFK *message* had triumphed, too. The people that killed him on film are in control, now. Guarantee at some point Oswald will be, even if in a sideways, not quite directly, way, called a hero. These are your former liberals. That you all still believe in this like children is . . . sad. It’s just sad. If you aren’t independently wealthy, and I now that many generational liberals are, including our host, though I express gratitude for him, you had better get ready. We are not going to do this for much longer, and I speak to ideology, not violence, which is more than you would give the rest of us.
There will always be plaintiffs’ lawyers and class action lawyers on the prowl for FOOLish clients, even when there was no legal harm/injury. Such lawyers and their new-found clients looking for a quick (or not so quick) buck. Especially the big bucks for the lawyers, while any participants in the class actions get pennies.
I always figure anyone flogging a product – chairs, spas, mattresses, etc.. – from Tom Brady to Mark Levine, Sean Hannity, or anyone else has, received the object free. It will be found in one of their numerous homes.
Aside from being marinated in the marketing nonsense dished out on radio, TV, and the internet, why would anyone of sound mind pay any heed to these puffballs? Could they be Dumb- o-crats?
The celebrities, like Brady, are essentially “contract employees”. They probably file IRS 1099 forms (employee contractors).
To the best of our knowledge, subordinates like Brady weren’t privy to dealings of the CEO. It’s not clear that all of the Board of Directors knew what was happening either (a more culpable group of managers than employee contractors).
If a professional Board of Directors member got fooled, how can you blame an NFL football player not trained in business law?
What if a spokesman got hired to do ads for a Las Vegas casino, would that hired actor be liable for a customer losing money on the roulette wheel or playing poker?
Crypto companies don’t carry or advertise FDIC Insurance to customers, there are no guarantees in crypto. Some of America’s most successful investors refused to invest in it at all, since they didn’t understand it.
If it sounds to good to be true it is.
Livieratos “is suing former Patriots quarterback Tom Brady.”
“Your Honor, I invested in a company because an athlete told me to.”
“Case dismissed. Bailiff, arrest that man for impersonating a responsible human being.”
“Life is pain, Highness. Anyone who says differently is selling something.”
They were selling something, and someone bought it.
By their own free will.
The gentleman suing Tom Brady has already secured his Financial Darwin Award. Why be greedy?
BUYER BEWARE – too many people seek free investment advise or listen to the talking heads on CNBC, Bloomberg and etc. for their advise. While I feel these movie stars, sports and etc. should know what they are endorsing the old saying BUYER BEWARE.
Dear Prof Turley,
First, kiss all the lawyers. Have you ever seen Kim Kardasian! That’s why she’s famous. I think? Same for Matt McConahey in his hot rod Lincoln. They’re both very talented actors. In their way.
However, I suspect the SEC, at least, would take exception to comparing a Lincoln, whatever Kim Kardasian is selling and crypto currency. If my shiny Lincoln breaks down I can call the dealer or Ford motor company. Who are you going to call if FTX hood-winks you out of your life savings? Ghostbusters?
If the immortal question for consumers is still “whether being a chump is the same as being a victim” .. . Afaict, the consumers at FTX were more victims.
And quite frankly, if being a chump or a victim are the only two options .. . the consumer is getting the short end of the stick, imo.
*i’m still pondering the liability, if any, concerning FTX’s famous ‘paid spokespersons’ .. . but I’m think at least 15 yard penalty and loss of down.
I believe it’s actually “caveat sucker”
Two questions: (1) isn’t it the consumer who’s the “chump” (easily deceived person)? (2) Will Larry David defend by pointing out that he was the FTX skeptic in the commercial?