Investors in the United States have filed a class action lawsuit against footballer Cristiano Ronaldo, accusing him of promoting Binance, the world's largest cryptocurrency exchange, which allegedly led to financial losses. The lawsuit seeks damages exceeding $1 billion.
In November 2022, Ronaldo collaborated with Binance to create the "CR7" collection of non-fungible tokens (NFTs).
These digital assets represent ownership of online content and were intended to reward Ronaldo's loyal fan base for their enduring support.
However, the partnership did not go as planned, as the value of these tokens plummeted from an initial sale price of $77 to a mere $1 within a year, leaving many fans disappointed.
Allegations and Regulatory Complexities
The plaintiff argues that Ronaldo's endorsement resulted in a dramatic spike, a "500% increase in searches," for Binance.
This surge allegedly led individuals to invest in what they term "unregistered securities" like Binance's BNB cryptocurrency.
According to the US Securities and Exchanges Commission (SEC), endorsing such assets necessitates compliance with disclosure laws, emphasizing transparency in financial endorsements.
SEC Chair Gary Gensler cautioned that celebrity endorsements of investment opportunities, especially crypto-assets, demand careful scrutiny by investors.
He stressed the need for clear disclosure of compensations received by these celebrities for promoting such securities. The lawsuit contends that Ronaldo failed to disclose the extent of his financial ties to Binance, sparking controversy over regulatory adherence.
Expanding Lawsuits and Celebrity Fallout
This lawsuit against Ronaldo aligns with a broader trend involving prominent figures facing legal repercussions for their involvement in promoting cryptocurrencies.
Major League Baseball, Formula 1, and Mercedes-Benz face similar class action lawsuits stemming from their endorsement of the failed crypto-exchange FTX.
Joining Ronaldo in this legal conundrum are celebrities like Lindsay Lohan and Jake Paul.
Lohan, known for her recent Christmas-themed advertisements, faced federal regulators' scrutiny in 2022 for promoting a crypto asset without transparently disclosing her compensation.
The Securities and Exchange Commission charged a group of eight celebrities, including Lohan and Paul, for illegally touting crypto asset securities without adequate compensation disclosures. Settlements totalling $400,000 were agreed upon by six of the implicated stars.
The Wider Ripple Effect
Andrew Verstein, a business law expert at the University of California, Los Angeles, underscores the inherent risks of undisclosed celebrity endorsements.
He warns that investing based on celebrities' recommendations might lead to unsound investments, potentially impacting investors who lack understanding or clarity regarding these investments.
Other Celebrities Caught in Crypto Quagmire
The saga involving celebrities and crypto promotion extends beyond Ronaldo's ordeal. Several notable figures encountered legal troubles for their association with different cryptocurrencies mostly because they did not admit they were paid to do so:
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Justin Sun
An entrepreneur facing securities law violations related to managing three crypto companies. Sun's recruitment of celebrity endorsers drew attention from the SEC.
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Lindsay Lohan
The actor's endorsement of TRX without disclosing payment resulted in scrutiny from federal regulators. Lohan settled charges after facing fines of $30,000.
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Akon
The singer promoted TRX in exchange for crypto assets and is also known for his cryptocurrency, Akoin.
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Jake Paul
Charged with illegally promoting crypto asset securities, Jake Paul's involvement added to the growing list of influencers facing legal implications.
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Kendra Lust
Charged by the SEC, Lust settled, among other celebrities, for promoting crypto without proper disclosures.
Resonating Troubles in Celeb Crypto Endorsements
The patterns emerging from these cases highlight the recurrent issue of celebrities endorsing crypto assets without transparently disclosing their financial ties.
The lack of clarity surrounding such promotions prompts regulatory scrutiny and fan concerns, emphasizing the importance of disclosure and due diligence in investment decisions.
Past Settlements and Lessons Learned
Celebrities like Kim Kardashian, Floyd Mayweather, and DJ Khaled have settled charges in the past for endorsing crypto assets without disclosing compensation received, which sheds light on the need for accountability in celebrity-backed promotions.
The allure of cryptocurrencies has enticed numerous celebrities, leading to both endorsements and cautionary statements.
While some, like Larry David and Ben McKenzie, have raised concerns or distanced themselves from crypto endorsements, others, like Matt Damon, Reese Wither Spoon, and Paris Hilton, have openly embraced and promoted various crypto assets.
However, as legal repercussions unfold and regulatory scrutiny intensifies, the intertwining relationship between celebrities and the crypto sphere remains under constant watch, urging both influencers and investors to approach endorsements and investments into cryptocurrency with heightened caution and transparency.