YouTube Finance Influencers Hit With $1 Billion Lawsuit After FTX Collapse
Following the downfall of Sam Bankman-Fried’s FTX crypto-exchange platform late last year, a number of high-profile celebrities became the target of a class action lawsuit alleging that they helped fuel the alleged Ponzi scheme’s popularity. As that lawsuit unfolds, the turmoil surrounding FTX continues with at least 10 YouTube financial influencers now facing a $1 billion class action lawsuit.
The lawsuit, which was filed in U.S. District Court for the Southern District of Florida Miami division, names popular YouTubers including Kevin Paffrath, Brian Jung, Graham Stephan, Ben Armstrong – popularly known as ‘Bitboy’ – Tom Nash, and Erika Kullberg as defendants.
The lawsuit was filed by Oklahoma resident Edwin Garrison and includes plaintiffs from Canada, Australia, and the UK, all of whom held high-yield accounts with FTX.
At the heart of the lawsuit is the accusation that these financial influencers helped promote FTX, were paid by the company, and steered collective millions of followers into financial dealings with FTX.
The lawsuit explains that after FTX fell apart, the YouTubers were quick to delete their videos promoting the crypto exchange and instead issued apologies acknowledging that they helped hype up the platform.
“Evidence has now been uncovered that reveals Influencers played a major role in the FTX disaster and in fact, FTX could not have arisen to such great heights without the massive impact of these Influencers, who hyped the Deceptive FTX Platform for undisclosed payments ranging from tens of thousands of dollars to multimillion dollar bribes,” explains the suit.
The lawsuit goes on to argue that FTX’s high-yield accounts were unregistered securities and that they should have been handled legally in a very specific manner. Because of their nature, and because of the defendants' extensive knowledge about the financial industry, these financial influencers should have also known that these high-yield securities were a scam. Instead of voicing potential concerns to their viewers, the content creators used their platform to hype FTX, subsequently encouraging viewers to participate in the company.
Additionally, the lawsuit argues that these content creators were selling FTX without explicitly telling their viewers that they were getting paid for that endorsement. The lawsuit reads, “Though FTX paid defendants handsomely to push its brand and encourage their followers to invest, defendants did not disclose the nature and scope of their sponsorship and or endorsement deals, payment and compensation, nor conduct adequate (if any) due diligence.”
While the lawsuit does not go into detail about specific total sums paid out to each influencer, there have been reports that named defendants were paid for specifically promoting the crypto platform on their channel. Defendant Kevin Paffrath of “Meet Kevin” is accused of at one point making at least $2,500 every time he mentioned the name FTX in a video.
Paffrath hit back against the allegations, explaining that his role as a content creator should not hold him accountable for the actions his viewers took. In a video response to the lawsuit, Paffrath defended, “At what point does sort of the promotion of an idea or a suggestion paid or unpaid rise to the level of actually being personalized advice? In my experience, it doesn't. In my opinion, at no point in me saying that ‘I think oil is going down and it's a good short’ rises to the level of personal financial advice. At no point does me saying ‘hey I'm investing in something,’ rise to the level of personalized financial advice.”
Paffrath added, “When people who are content creators are sharing ideas and perspectives, they're doing just that; they're not giving you personalized insight, they are giving you ideas and perspectives.”
Paffrath later shared that he would be willing to help those who lost money to the scheme. “I’d be happy to work with them as a charity,” he shared, “But let’s be clear, that’s what it is. It is not taking responsibility.”
Other defendants have been quick and defiant in their response to the lawsuit. Ben Armstrong, or ‘Bitboy’ as he’s known by his base, contends that he holds no responsibility for the failure of FXT and the loss of investor monies.
Armstrong has since shared that he was one of the first in the financial industry to criticize FTX’s business model. One month before the collapse of FTX, Armstrong shared a video with his viewers in which he warned them about FTX and its shady business dealings. After news of the lawsuit, Armstrong tweeted, “Countersuit coming. The lawyers on this case can’t possibly be more stupid. I’ve never had contact with anyone at FTX and never even had a reflink. Show me you are dumb without telling me you are dumb.”
Members of the class action lawsuit argue the opposite, however. They detail that because these financial influencers have built a platform in which they provide information to an audience that is actively seeking advice and knowledge about financial markets, these content creators should be held liable. Additionally, arguments have been made that these content creators should especially be held liable when their brands are largely built on offering self-help guidance so that viewers can attain financial freedom.