A group of investors led by Edwin Garrison has filed a class-action suit against a group of YouTube “FTX influencers,” seeking $1 billion in damages for promoting FTX crypto fraud without disclosing compensation. The lawsuit was filed on March 15th in the Southern District of Florida, Miami Division. The defendants are eight YouTubers, the talent management company responsible for promoting FTX, and the agency’s founder, including Kevin Paffrath, Graham Stephan, Andrei Jikh, Jaspreet Singh, Brian Jung, Jeremy Lefebvre, Tom Nash, Ben Armstrong, Erika Kullberg, and Creators Agency LLC.
The lawsuit alleges that the YouTubers, who were paid by FTX to promote the brand and encourage their followers to invest, failed to disclose the nature and extent of their sponsorship or endorsement deals, payments, and compensation. It also claims that the plaintiffs suffered damages by purchasing an unregistered security from FTX in the form of a YBA (yield-bearing account), which the defendants promoted for their financial gain and/or FTX’s benefit.
The Moskowitz Law Firm is representing the seven plaintiffs named in the lawsuit, who are from various countries and all purchased an unregistered security from FTX. The suit claims that global and national classes of plaintiffs were identified, representing “thousands, if not millions, of consumers globally, to whom FTX offered and/or sold YBAs.”
The lawsuit also cites a warning from the United States Securities and Exchange Commission in 2017 that persons promoting yield-bearing accounts could be prosecuted for promoting an unregistered security or failing to disclose their payments and compensation properly. The suit argues that the SEC has taken a “consistent approach to cryptocurrency” and references recent and ongoing cases involving the SEC and the crypto industry, as well as the Howey and Reves tests.
The suit consolidates several class-action suits and is the first-filed FTX-related class action in the country. The Garrison suit was filed on November 15, 2022, and Garrison is also a plaintiff in the class-action suit filed against alleged celebrity endorsers of FTX.