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When the $32 billion FTX cryptocurrency exchange crashed last November, founder Sam Bankman-Fried was quickly targeted as the villain. Reports alleged that Bankman-Friend grossly mishandled the funds that were entrusted to FTX by investors. In the days that followed, he was charged with fraud and the mishandling of billions of dollars worth of cryptocurrency assets.
As the FTX saga unfolded, however, a host of others were labeled villains and accused of playing a role in misleading investors. Among them were some unusual suspects: influencers who promoted FTX to their fans.
“FTX, like a lot of players in the crypto space, enlisted the help of some big-time influencers to attract attention to their platform,” explains Adamm Miguest, founder of Rapid Launch Media. “What many of those influencers did not suspect is that their fans would hold them responsible for their recommendation.”
Adamm and the team at Rapid Launch Media promote songs on TikTok, naturally integrating them into the TikTok community. The first song Adamm worked on went on to achieve over 1 billion streams. Prior to founding the agency, he was the in-house photographer for Hype House, which allowed him to build an extensive network of influencers and music contacts including Lizzo, Cardi B, and Future.
The charges against FTX influencers
In the days following the FTX collapse, a class-action lawsuit was filed alleging that Bankman-Fried and others cost investors billions of dollars by providing misleading information. Among the others named in the lawsuit are some well-known celebrities who loaned their star power to FTX. The influencers include football superstar Tom Brady, supermodel Gisele Bündchen, basketball superstar Steph Curry, television producer Larry David, and businessman Kevin O’Leary.
According to the lawsuit, which was filed in the Southern District of Florida, Edwin Garrison invested in FTX “…after being exposed to some or all of Defendants’ misrepresentations and omissions regarding the Deceptive FTX Platform.” FTX had an active presence in South Florida, even paying $130 million for the naming rights to the arena where the Miami Heat professional basketball team plays. Garrison claims that misinformation provided by those named in the suit led to “damages for which Defendants are liable.”
The lesson for influencers
The fallout from FTX should serve as a powerful reminder for influencers that the deals they sign are business deals. As such, they should be subject to a healthy amount of due diligence.
“Influencers basically become a spokesperson for the brand,” Adamm explains. “‘Ambassador’ is the term that is often used to describe such influencers. The reports on the FTX lawsuits make it clear that the defendants made their decisions to engage with FTX based in part on the recommendation of influencers. If those influencers aren’t convinced the product is trustworthy, they should not be representing it.”
It is clear that some of the influencers who signed on with FTX believed that it was a sound company with a promising future. Kevin O’Leary said in an interview following the FTX collapse that he would support Bankman-Fried again. Others, however, have only said that they were misled as to FTX’s practices along with its many investors.
Staying influential after FTX
Whether or not the courts will hold influencers accountable for a role in the FTX failure remains to be seen. In the interim, it is upon those influencers to convince their followers that they can still be trusted. What does that look like?
Some lesser-known influencers involved with FTX, including YouTuber Graham Stephan, have issued public apologies through their channels for communicating that FTX was trustworthy when that was not the case.
“Even with a high level of due diligence, influencers can make mistakes,” says Adamm. “When that happens, they need to own it and apologize for it. Doing anything less will only further erode trust with their followers and make it less likely that brands will want to work with them in the future.”
The apology offered by Graham Stephans provides another important lesson that influencers should learn from the FTX collapse. Stephans offered his apology on November 9, 2022, as the revelations about FTX were becoming public. Included in his apology was the advice to get funds out of the FTX exchange while there was still time.
“Influencers can’t look at their relationships with brands as set-it-and-forget-it,” says Adamm. “They need to stay up-to-date on what is going on with the brand, especially if it is in a volatile market like crypto. If their position moves from positive to concerned, they need to be ready to let their fans know.”
