Celebrities face legal trouble for promoting NFTs

Celebrities face legal trouble for promoting NFTs

Celebrities, like everyone else, just want to be associated with what’s cool and new. In the last five to six years it has been cryptocurrencies and NFTs. It’s a new frontier in celebrity shilling for products, but it’s not as simple as just lifting a can of your favorite beer and saying it tastes great. Blockchain carries risks for everyone, and when you’re famous, the costs of taking those risks could get out of hand very quickly.


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Seventeen famous names revealed it in early August 2022. Then the consumer watchdog group Truth in advertising (TINA) felt letters to a diverse group that included A-listers such as DJ Khaled, Eminem, Gwyneth Paltrow and Tom Brady. Each letter was tailored to the recipient, but included the following statement:

While TINA.org is not currently addressing a specific deceptive marketing issue related to such postings, we have found that the NFT celebrity promotion field is rife with deception, including, but not limited to, failure to clearly and prominently disclose the promoter’s material connection to an approved NFT to the company, as well as the omission of other material information, such as the risks associated with investing in such speculative digital assets, the financial harm that may result from such investments, and the personal benefit(s) that the promoter may gain from the promotion(s).

The letter is known to require them to disclose a financial connection to any NFT collection they promote, and then singled out Justin Bieber and Reese Witherspoon. TINA was on the line between former inBetweeners NFTs and the connection of the latter with World of Women NFT.

The letter addressed to Reese Witherspoon was blunt. It links to tweets the actor posted about World of Women NFT 2021 and 2022 and states that the Federal Trade Commission (FTC) “requires social media influencers like Ms. Witherspoon to clearly and conspicuously disclose when they have any financial, personal or other material relationship with the brand.”

Witherspoon, the letter said, “is selling the NFT company (in which she has a personal stake) without disclosing the risks associated with investing in such speculative digital products and the financial harm that may result from such investments.” That lack of transparency, TINA’s letter concluded, “is particularly important in light of Ms. Witherspoon’s widespread popularity among fans of varying degrees of financial experience.”

Like August 8th BuzzFeed Report in regards to prominent notices, even celebrities who buy Bored Ape out of pocket are “essentially pumping up the value of their own investment” when they do anything to promote the collection, like post a picture on Instagram.

TINA’s warning letters were an important warning to stars who don’t want to run afoul of the Federal Trade Commission. TINA’s warnings often preceded the FTC’s filing of a lawsuit, known as “Notification of offenses relating to misleading or dishonest conduct in relation to referrals and representations.” Most celebrities would rather not be affected by the kinds of significant penalties that the government can impose for dishonest or deceptive practices.

The BAYC saga of Seth Green

A few months before most of TINA’s letters came out, “Robot Chicken” actor, writer and co-creator Seth Green discovered another danger of that blockchain life: Legal gray areas abound.

Green bought several Bored Apes (BAYC), including #8398, named by Fred Simian. Not long after he went shopping, Green fell for an old-fashioned phishing scam—responded to a message that eventually prompted him to enter his OpenSea login information, and soon some of his most valuable NFTs were transferred to a “Mr. Cheese” wallet.

The actor was desperate to get his property back, monitoring Probably Mr. Cheese’s Twitter account and posting public messages asking for Fred’s return. It turns out that Green didn’t just run a Twitter account for Fred Simian — by acquiring the copyright to Fred through his purchase, Green was building an entire mixed-animation-reality sitcom, “White Horse Tavern,” around the character.

White Horse Tavern @Veecon with Seth Green and Garyvee

Ultimately, blockchain records show that an account associated with Green’s known purchase history was used to repurchase Fred Simian, this time for nearly $300,000.

If Green had taken the case to court, he wouldn’t have it was easy for him. Blockchain is designed for anonymous transactions, and it can be difficult enough for police to investigate online crimes – add in the security of cryptocurrency and the result can be a nightmare for even seasoned online sleuths.

Seth Green’s ordeal with Annoying Monkeys may have been a little simpler than the celebrity disclosure concerns that put Gwyneth Paltrow and Jimmy Fallon in the FTC’s crosshairs. Unknown people buy NFTs and trade cryptocurrencies every day, often facing phishing attacks. What happened to him happens to many consumers – The FTC reported in June of this year that fraudsters have taken a billion dollars since January alone.

We’re talking about your reputation

TINA’s warning letters and Seth Green’s adventures in BAYC land are just two aspects of the complexity of cryptocurrencies. Celebrities face other challenges when they get into cryptocurrency in some form—challenges that have more to do with PR than the law. During Super Bowl LVI in February 2022, Matt Damon and Larry David made an appearance high profileexpensive advertisements for crypto.com and FTX exchanges.

Both videos received a lot of attention on social media at the time, but in June 2022 crypto winter started. Damon’s and David’s became food bitter jokes from those who are losing money in the tank and well market schadenfreude for crypto skeptics.

The commercials seemed to drop out of regular rotation fairly quickly, so it’s likely that the damage to any star’s reputation was minimal in the long run—and after all, Matt Damon and Larry David were apparently paid spokespeople.

In a recent article for Law 360attorneys Amy Mudge and Lauren Bass of a national law firm Baker & Hostetler LLP discussed Truth in Advertising’s letters to celebrities about their lack of disclosure. Mudge and Bass acknowledged that while TINA’s letters reflect frustration with the “lack of aggressive enforcement by individual influencers,” the FTC is likely taking the right approach to these issues on its own. A government agency has published guidelines for influencers in plain, non-legalistic language and generally took an educational approach rather than aggressively issuing warnings.

Mudge and Bass write that the FTC’s “focus on education rather than reprimand is arguably a smarter use of the agency’s limited resources. This approach has helped increase awareness of responsibilities as well as overall compliance from brand marketers, influencers and even social media platforms.”

Still, the lawyers have some free advice for celebrities still interested in NFT collaborations.

“Regardless of the product or medium in which such an endorsement takes place,” Mudge and Bass write, “remember to follow federal endorsement guidelines and to clearly and conspicuously disclose the relationship of the parties along with the potential volatility of any digital asset investment. ”

Be clear about this if you are being paid to tell others to invest in new, as-yet-unknown funds. The crypto world is murky enough as it is.

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