A U.S. District Judge has significantly limited the scope of the lawsuit filed against celebrities for promoting the collapsed crypto exchange FTX. Investors originally sought $11 billion in damages, alleging celebrity endorsers including Tom Brady, Larry David, Naomi Osaka, and others were liable for promoting FTX prior to its bankruptcy in November 2022.
Judge K. Michael Moore ruled that plaintiffs did not demonstrate the celebrities were aware of FTX’s fraudulent activities or that they had intent to deceive investors. Most claims against the celebrities have been dismissed, sparing them from major financial liability. However, the portion of the lawsuit alleging celebrities promoted unregistered securities remains active and could proceed.
This legal precedent draws attention to the vulnerability of celebrity endorsements in the crypto industry and could prompt heightened regulatory scrutiny on such marketing practices in the future. Legal communities and investors are closely monitoring the development's potential ripple effects on future celebrity crypto promotions and the evolving regulatory landscape.