The shockwaves from the catastrophic collapse of cryptocurrency exchange FTX are still reverberating across the world. Founder Sam Bankman-Fried is currently facing over 100 years in prison on several charges, including money laundering, fraud, and bribery, and billions of dollars in customer investments are feared to be lost for good. However, one very well-known celebrity deftly sidestepped liability in the FTX mess by doing her due diligence before taking part in FTX’s disastrous celebrity endorsements: pop star Taylor Swift. The question she asked not only sealed her non-involvement with FTX but may also help others avoid falling for other crypto-related scams in the future.
Taylor Too Swifty for FTX Reps
The failed crypto exchange famously fell apart in November of 2022 when questions began to be raised about how it was sharing funds with a sister firm. A trickle of withdrawals from worried customers soon became a deluge that the firm could not contain or honor. It was an inauspicious end to a company that just a few short months before was an industry darling, whose CEO hobnobbed with rich industrialists and celebrities. At its height, FTX could boast endorsements from several high-profile celebs, including football star Tom Brady, basketball legend Shaquille O’Neal, and comedian Larry David, among others.
However, one superstar that FTX was unable to ink was pop star Taylor Swift. When approached by FTX with an enormous $100 million offer in 2021 to sell tickets to her fans as NFTs, Swift was hesitant. According to Adam Moskowitz, an attorney currently handling the massive class-action suit against FTX, Swift asked FTX if they could assure her that said NFTs would not be sold as unregistered securities. Evidently, FTX’s response was not to Swift’s liking and the deal fell through.
She Knew They Were Trouble
Per Moskowitz, Taylor Swift was one of a very small number of potential endorsers approached by FTX who pushed back on the offer with questions as to how FTX was classifying its ‘products.’ It is against federal law for a company to sell securities unless the particular investment has been registered with the SEC or exempted. In December of 2022, the SEC said that FTX’s cryptocurrency was considered a security because it was sold as an investment contract. But it was never appropriately registered per law.
In Swift’s case, FTX may not have done their homework when trying to seal the deal with the world-famous singer, whose father was a financial advisor for Merrill Lynch for over 30 years. Evidently this familial link served her all too well, as Swift’s line of questioning helped her avoid becoming lumped into a long list of FTX defendants and shake off the bad blood and negative press that is currently haunting Brady, O’Neal, et al.
Despite a massive payday in the works, Swift’s astute curiosity and willingness to dig into FTX’s business model saved her from a potentially damaging lawsuit and – quite probably – saved many of her loyal and trusting fans from losing untold amounts of money after FTX’s implosion. Securities law and related issues can be extremely difficult to navigate, especially with new and evolving technologies like NFTs and cryptocurrency that can be confusing and difficult to understand. What may seem like a sure thing has ruined many fortunes throughout the years, while shrewd and careful investing has made others wealthy for life. If you are trying to decide whether to leap into a new securities venture, Richards Rodriguez & Skeith’s experienced corporate and securities attorneys may be able to help.