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.
“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the …
bamboozle” Carl Sagan. Tom was bamboozled also. I can resist anything, but temptation.
Disagree. As others have pointed out, these are securities.
That aside. there’s a difference between being an anonymous spox in a commercial and lending your name and fame to pushing a product.
Professor….you miss the point….you can not make a “public” offering….to the public of non registered securities. Only “accredited invenstors” can buy unregistered products and that can’t be advertised public. For example if I wanted investors for a strawberry patch in Florida….I can not advertise that to the public….. Not even in the local newspaper. These ” opportunities” can’t be made public….they are only “accredited investor” opportunities. …..only for millionaires already….and not public….offerings. And that’s the rub….was he selling a “security”?…..if he was by way off the proverbial orange groves….then he couldn’t make his offering “public”….and indeed he didn’t until he bought all the promotion….so at root…what was he selling? He was definitely selling x….that was necessarily “grouped”….he was either selling a security or selling an empty product. Either way Mr wonderful and Tom were promoting a security…..which they can’t pubically do….or they were promoting a shitty product which they must stand behind. One front is damages the other is 3x damages. Pick your poison.
But he’s running out of the Bahamas for SOME reason……some intentional reason. Answer why….to that and intention falls in place. And it’s nor just a fair and good intention to “challenge” the law say on accredited investors…it’s to bilk people. The fact he bilked Mr wonderful and Brady….is res ipsa loquitor. The kids a criminal from the get go…why due diligence wasn’t enough for Brady or wonderful….is greed. Pure greed. Nothing else. They had enough already but wanted more. It was all greed. Laws be damned. They knew USA laws….they tried to skirt them in the Bahamas….intended to…and intended to get their fans to skirt USA laws too. Creeps. Treasonous really.
Jaelyn: Interesting comment and I believe you are correct about accredited investors in private offerings. However, I thought that at least some Bitcoin ETFs were in fact publicly-traded on NYSE? Do you know the names/symbols of derivatives under FTX? (This is not a trick question, I do not know.)
I don’t do the markets so I’m just catching up on this myself. All I know as a person…I just think it’s a shit rule you can’t look for investors unless they are accredited. No advertising. So what’s good for the goose is good for the gander…..if I can’t advertise my strawberry patch….how can Sam advertise his? And there is a way to challenge that law without totally taking advantage of that challenge. And yes because I have my retirement “managed” as a retail investor….I am totally concerned the idiots managing will buy crap into it..like bitcoin. It takes “faith” to go into other “money” like that….
And frankly I prefer to leave my lot in fellow Americans….who I have a lot in common with….I’m not about to “die” for bit coin…..but I will give my life for a fellow American…..even if it’s because we are only united by fiat….he’s my neighbor. Hope this helps your reconciliation of bitcoin. I don’t care who put it on the market…it’s still ultimately worthless…unless you get a market that transcends borders…but even in revelations….there is still nations….
And God gives authority to governments….and so I’m not sure which govt put bitcoin on an exchange. Prolly came from Brussels…..anyone else should be afraid of w to…unless they are in on the scheme.
There have always been “Snake Oil Salesmen” since the beginning of time.
This is the reason we justify government regulatory agencies. Supposedly the reason these agencies exist is to monitor, prevent and minimize these types of abuses.
Did Congress take away authorities from oversight agencies? Do our government agencies need “incentive pay” in order to break bureaucratic inertia? Not criticizing the government employees but the bureaucratic “system” that disincentivizes action.
Congress also dismantled federal laws like the “Glass Steagal Act” enacted after the Great Depression. Then companies like Enron exploited this lack of regulation. So sometimes these abuses can be prevented if we would have left these laws alone. Glass Steagal Act worked fine for over 50 years.
Regardless, a hired employee-contractor – like Tom Brady – is the least culpable. Why didn’t the CEO and Board of Directors (privy to secret proprietary information that employee-contractors aren’t), why didn’t the top management prevent this?
“This is the reason we justify government regulatory agencies.”
Which reason is wrong. You don’t punish the innocent for the sins of the guilty.
The more important issue that nobody is talking about, of course, is that there are no plans to institute CLAWBACKS, as was the case in the Madoff fraud case. All of the political gifts and grafts that FTX and its agents paid should be recovered from the Democrat and RINO recipients. But they won’t. Who says that crime don’t pay?
I’m pretty sure Ray will claw them back as fraudulent transfers…the popcorn will be watching if they give it up or fight……that’s the entertainment value. ..because they didn’t have the money…..so they ain’t going to give it up…partly why Ray was on st o w. Isn’t this a Bahamas case? Why we interfering? Of I get it socialize American laws….no answer the Bahamians laws fist. They are in w to? So when Canada comes calling. Go to w to against Bahamas not use. He’s only in the USA by long arm. And somehow by bankruptcy to recover for a rinse and repeat. Hang him before he gets to repeat.
“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.”
I agree.
Celebrity endorsers for a finanical instrument reminds me of an out-dated approach some used in the latter half of the past century regarding “Odd Lots” of security transactions.
Basically an Odd Lot is the purchase or sale of a security in numbers of shares different than 100 or multiples of 100. The pricing generally was more favorable in these round numbers such as 100 shares or 10,000 shares and consequently professional/sophisticated investors and institutions who mostly knew what they were doing traded in those numbers.
Conversely, when the small/individual/unsophisticated investor buys or sells stock they usually do so in small Odd Lots such as 17, 3, or 31 shares.
The strategy goes that the small investor trades in Odd Lots and the small investor is usually wrong. Therefore if trade volume of a particular stock shows a strong odd lot trend, the more profitable approach is to take the opposite position of what the small investor trades. This approach is not applicable in today’s world but was subscribed to decades ago.
So if a non-financially-gifted celebrity is contracted to endorse or promote an investment, insurerer, or financial institution, for me it lends crediblity to the argument that the company is not able to promote itself based upon merit/achievment so it appeals to those who are unsophisticated and easily won over by trinkets and kardashianism. Like the odd lot trader of the past, if people who make bad decisions are actively and exclusively sought-after by companies who use unqualified celebrities to promote the firm, most likely this is a company to be avoided.
I’d rather see in adverts for example a property/casualty insurance company that shows the numbers, excellent fundamentals, longevity, solid reputation, and everything disclosed. I don’t need pictures of people walking dogs, mug shots of attractive women smiling, or cartoon characters’ inane drama. It’s the numbers that matter.
Does this mean we can sue the Hollywood cabal that fawns all over the grifting dims.
Darren: -But capitalistic marketing has always (and intentionally) targeted the masses, – not the few who are adept at calculating risk or even reviewing/understanding SEC prospectus disclosure requirements, n’est ce pas? That being said, I would guess that at least a smaller number of odd lot traders are not naive or ‘non-financially-gifted,” -they simply thrive on risk, in the same way that I might play a long shot at the Derby.
(I agree with you that most of the chosen “celebrities” likely do not fall within my example, ha ha!-Nor are they likely to be hands-on investors or day traders.)
Indeed oddly and printing of money…magnitudes the printing of money. That is when you put money in your bank….it goes down as an assert. Of the bank. Not a liability. … Deposits aren’t a liability until ppl want their money back. We have to be fair in accounting to Sam. Deposits were frustrated as assetts……just like every other bank. ..the question is if he was capitalized…like a bank.? Because we know already there are lots of remedies…..hence our 2008 crisis and too big to fail. But what separates them from this scheme?…there was an “unsocialalized” …bank run and no Paulson to run to the treasurey. And an sex asleep at the wheel to stave it off. But at root it’s no different. Same noncaptilized situation. Worse the grid allows trading with it..
Putting all finance at risk….and the sec sits and pleads as idiots….to what end? Idiot end. Hang em. Good for nothing than pleading out the greatest crimes. Hang.
It also depends when the celebrity accepted the employment.
If a celebrity accepted the gig in 2020 (when crypto and the employer appeared more legitimate) -or- accepted the job in 2023 fully aware of the fraud.
Guessing most wouldn’t accept that job today with that full knowledge. Sort of like when Ronald Reagan did cigarette ads (around the 1950’s). He probably didn’t know it was a dangerous product when he did the ads.
Celebrity endorsements, whether in sales or politics, are used because they work. Celebrities know this and the companies and politicians that hire them know this. Because both intend for the endorsements to cause people to act, I do not have a problem holding celebrities accountable when the product or person they are selling turns out to be a dud. How do you hold celebrities accountable? If it is the sale of goods or services, and the amount involved justifies it, sue them and the company for false, misleading or deceptive trade practices since most states’ consumer protection laws do not require intentional misrepresentations. This remedy could be illusory, depending on where the celebrity lives. If you cannot sue the celebrity or the celebrity promoted a political candidate who turns out to be like Joe Biden, then stop going to the celebrity’s movies or listening to his or her music. Unfortunately we live in an age where people eschew accountability for all except those who send mean tweets.
This is true. It’s why L. Ron Hubbard wanted celebrities in Scientology, and modern liberalism is very much the equivalent of Scientology. Look it up.
James: EXCELLENT!