Less than a week later, a $1bn class action lawsuit was filed against Ronaldo for allegedly assisting Binance in soliciting investments in unregistered securities. The crux of the claim is that the footballer’s promotion of the NFTs was “deceptive and unlawful”.
It is alleged that Ronaldo targeted consumers whose unfamiliarity with crypto investments and Binance rendered them vulnerable. This, coupled with his alleged misrepresentations and omissions as to the safety of Binance, misled the public into investing in unregistered securities.
For example, the plaintiffs allege that Ronaldo’s “promotional efforts” led to a 500 per cent increase in searches using the word “Binance”. Further, in breach of the SEC’s anti-touting law, the footballer allegedly failed to disclose either the form or amount of compensation that he was receiving for his partnership.
Ronaldo’s case is just one of many that have been brought against celebrities for their involvement in promoting loss-making or failed crypto investments and/or platforms.
Numerous celebrity endorsers of the FTX crypto exchange, most notably Tom Brady, are being sued following its collapse in 2022. Similar to the case against Ronaldo, the plaintiffs allege they had been lured into investing in the fraudulent scheme under the false impression that they were investing in safe and registered securities.
The SEC is also cracking down on breaches of anti-touting laws. Kardashian made headlines when she promoted a crypto asset sold by EthereumMax without disclosing that she had been paid $250,000 to do so.
The SEC’S division of enforcement has pointedly reminded crypto exchanges and their brand ambassadors that they cannot “ignore the rules because [they] don’t like them … the consequences for the investing public are far too great”.
The crypto winter may see an increase in securities litigation brought against celebrity promotors. A defendant’s ability to pay is a fundamental consideration in any litigation. Genesis Global Capital, Core Scientific and BlockFi are just a handful of the crypto companies that have recently filed for bankruptcy, so it may be unsurprising that plaintiffs are seeking their relief from deeper, more reliable pockets.
Whose fault is it anyway?
The case against Ronaldo should serve as a stark reminder of the need for strong legal and regulatory frameworks to minimise the financial risks for vulnerable consumers. This trend of class action securities litigation against influencers has been predominantly US-focused. Notwithstanding this, UK-based crypto companies and celebrities could open themselves up to similar problems.
Prospective claimants may consider bringing claims for misrepresentation, which can occur when a third party makes a pre-contractual false statement that induces another party to enter into a contract. This would be actionable if the misled party suffered loss as a result of entering into the contract.
