With several new class action lawsuits aimed at celebrities who promoted failed cryptocurrency exchange FTX, and Bored Ape Yacht Club, expert Laila Maidan explains why high-profile people are different than the typical investor, why the SEC is cracking down on insufficient paid ad disclosures, and why consumers need to do their due diligence before any investments. 

With several new class action lawsuits aimed at celebrities who promoted failed cryptocurrency exchange FTX, and Bored Ape Yacht Club, expert Laila Maidan explains why high-profile people are different than the typical investor, why the SEC is cracking down on insufficient paid ad disclosures, and why consumers need to do their due diligence before any investments.&nbsp;

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Will Celebrities Who Promoted FTX Face Legal Action?

the latest victims of the crypto collapse, celebrities Justin Bieber paris Hilton and more were named in a lawsuit against the makers of the board ape yacht club. While another suit is going after celebrities promoting failed crypto exchange F. T. X. So it's all blowing up right now in people's faces. So here to explain how this all might shake out and how consumers can actually protect themselves is investing correspondent at Insider Layla Maiden, thank you so much for joining us. So is there a precedent for celebrities being held responsible for promoting products and services like this? Yes, there is but a bit more recently than than historically we've seen kim Kardashian, we've seen Floyd Mayweather, we've seen DJ Khalid all be charged in the past is specifically to their ties with promoting cryptocurrencies without being too clear with their fans that they were compensated to do so. So this isn't new. However, celebrities being charged specifically for making commercials. You know, that's something that we're starting to see right now more of and I suspect we're going to see a lot of this in the future. Yeah, like Larry, David tom brady all celebrities tied to F. D. X. One person who's really been out and about about all of this is kevin O'leary from shark tank. He actually testified he lost $15 million that he was paid to promote FT. X. When the exchange went down later, are celebrities any different from the rest of F. D. X. S defrauded investors here. Yes they have access to advisors, they have access to attorneys, They do this as a career. And so, uh, you know, kevin earlier was also compensated to buy F. T. X. And, you know, whether he may have disclosed this at some point, it's it's possible. But but uh, I've seen him speak about F. T. X. And I don't recall him disclosing each time. He spoke about F. T. X. That he was compensated. So it was a little bit of news to me to know that he, you know, that $15 million or whatnot was given to him. But um, we have to remember that the average investor, you know, sees an ad for from someone that they really look up to and they're talking about, you know, this investment type vehicle. Um they might not know much about it, but, you know, you're at the Super Bowl, you know, these exchanges are being promoted. You're sitting there, you're like, hey, let me sign up and maybe get $10 free. You know, Cryptocurrency, for example, while you're favorite football player is promoting it. So, but on the other end, someone like Kevin o'leary, you know, he's in the industry, he's been investing in crypto for a while. So there's a big difference and you bring up a good point because there's been a huge increase in these celebrities endorsing things like crypto, N. F. T. S. So do you think that this was a strategy overall in this industry to have these companies maybe have these celebrities helped legitimize the industry as a whole? Well, the industry is one thing. So these are exchanges and their centralized, you know, financial firms crypto in and of itself is decentralized these assets, most of them have nothing to do with, you know, any of these founders. But when crypto became popular, these exchanges were their business model was based on a lot of volume trading volume and people coming onto their platform. So of course they went to these celebrities, um and you know, well known names to have more people sign on and bring volume on because that's how they make their money through these fees. Yeah, well, and legitimacy as well, which is also part of the reason why celebrities endorse any product. How do consumers do their due diligence before making some kind of an investment, especially if it's on a risky asset? Say a Cryptocurrency? Well, think of it like this. Cryptocurrency is a very uh new industry Blockchain technology is very complicated to understand. So someone like kim Kardashian, for example, or, you know, a football player that they're going to have very limited knowledge about this sector. So you probably shouldn't be taking advice from, you know, any public figure when it comes to investing in cryptocurrencies. If you don't understand the technology, you don't understand this particular crypto and why you're investing in it, You shouldn't be investing in it? Um you have to be able to do things like read the projects white paper and understand what it does and who the developers are and these are things that are very complicated. It's hard even for, you know, some crypto experts to understand certain projects. So, but that's the nuances of investing in these assets first and foremost. Yeah, I always do your due diligence herself. But you mentioned kim Kardashian being fined by the sec for failing to disclose her payments as she was given to promote Cryptocurrency. So why is this disclosure so important and why don't celebrities and influencers just go ahead and say they were paid? Well? She did very minimally disclosed. Uh, so she put out a, uh, it was an instagram post and then at the bottom it said hashtag at very small, but she didn't say how she was compensated or how much she was compensated. And so this is extremely important to let people know that you were compensated because otherwise people are gonna assume, wow, you're part of this project, you know, the technology and what this project is doing. Meanwhile you, you know nothing, you were just given compensation to say something and people need to know that to realize, you know, that there's a reason why you're promoting that and it's not because you actually believe in it, especially when these influencers are doing it from their personal social media pages right there, taking on, uh, this name personally. And so people just assume that you're probably part of that project. And it's deceptive. So they should, yeah, Layla really quickly. Just this week, eight influencers charged with fraud for deceiving their followers in this pump and dump scheme that was worth over $100 million. Is this going to be any issue that moves beyond just even crypto here even to stocks? Yes. So during Covid, we saw the democratization of investing before Covid, you know, most people invested through a four oh one K or a fund manager, but you know, with things like Robin Hood coming to town, it's easy to get an account, it's cheap to trade. So we're seeing a lot of retail investors come to the space and, uh, and then we're seeing a lot of people taking advantage of these wave of new retail investors. So the sec has, has this race against time and they have this on their hands right now to figure out not just how to come back and charge people, but also how to educate both investors and influencers because while some influencers may know what they're doing, the eight that were charged, were aware and they, that they were deceiving deceiving investors as per their conversations between each other. But there's a lot of other influencers, they're really young influencers, they don't even know that certain things are considered securities. Yeah, that's why these laws, right. That's why, as you said, you got to do your due diligence and do the research yourself yourself. Thank you so much Layla made from inside or appreciate you with that insight.