Pop icon Taylor Swift reportedly turned down a $100 million sponsorship offer from the now-bankrupt cryptocurrency exchange FTX over unregistered securities concerns. FTX filed for Chapter 11 bankruptcy in November 2021. A number of FTX celebrity endorsers are currently facing a class action lawsuit led by attorney Adam Moskowitz and former Weinstein lawyer David Boies. Those facing legal action include NBA Hall of Famer Shaquille O’Neal (Shaq), American football player Tom Brady, and comedian Larry David. Moskowitz, who is representing investors that claim to have suffered losses from FTX, has described the exchange as a “pyramid scheme” and accused its celebrity endorsers of promoting a “Ponzi scheme,” which impacted “thousands, if not millions,” of consumers nationwide.
Reports suggest that Taylor Swift was a rare exception among the celebrities who promoted FTX. When approached by the exchange’s former CEO Sam Bankman-Fried, Swift did her due diligence and consulted with her lawyer before refusing the offer. Speaking on an episode of the Block’s Scoop podcast, Moskowitz revealed that Swift asked Bankman-Fried if the securities were registered, indicating that she was concerned that FTX might be promoting unregistered securities, a potential regulatory violation.
Swift’s suspicions were well-founded, as FTX came under scrutiny from regulators in the US over its offering of leveraged trading products to retail investors. The Commodity Futures Trading Commission (CFTC) began an investigation into the exchange in March 2021, accusing it of allowing unregistered derivative transactions. FTX had allegedly failed to register with regulators and had not implemented the necessary anti-money laundering (AML) and know your customer (KYC) controls. The CFTC ultimately reached a $210 million settlement with FTX in September 2021 over the activities of its offshore subsidiaries. This settlement was reportedly the second-largest by the CFTC in its history.
The settlement with the CFTC, coupled with the ongoing class action lawsuit, has put the spotlight on FTX’s business practices and raised questions about celebrity endorsements in the cryptocurrency industry. Some have criticized celebrity endorsements as encouraging unsophisticated investors to speculate on cryptocurrencies they don’t understand.
In the case of FTX, it appears that some celebrities may have lent their names to a crypto exchange without conducting the necessary due diligence or evaluating the potential risks involved. The case serves as a reminder that celebrity endorsements should not be taken as evidence of the legitimacy of a project or exchange. Investors should always do their own research and seek independent advice before investing in any cryptocurrency or crypto-related venture.
Turning down the offer from FTX was a smart move on Taylor Swift’s part, as the exchange’s financial improprieties would have caused reputational damage to her and her brand had she signed on as a sponsor. Her concern over securities compliance demonstrates a level of financial savvy that not all celebrities possess. Swift’s father, Scott Kingsley Swift, founded the Swift Group, a wealth management and financial advisory group, so it’s not surprising that he passed on some financial acumen to his daughter. In fact, Taylor has talked about her father’s profession and how his dedication and passion for his work inspired her to want to become a financial adviser when she was just eight years old.
‘Taylor is smart, and her father is a well-regarded investment banker,’ said Tesla and Twitter CEO Elon Musk, praising Swift’s business acumen. Although Musk himself initially considered a partnership with FTX, he later turned down an investment offer from its CEO Bankman-Fried, whom he described as “bullshit.” Musk’s endorsement can carry some weight in the cryptocurrency community, as evidenced by the impact of his tweets on the prices of different digital assets. However, like any celebrity or influencer, Musk’s promotion of cryptocurrency should not be taken as investment advice, and investors should do their own research and exercise caution.
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