After the collapse of FTX, a $32 billion digital asset empire that was a media darling, the top U.S. consumer protection agency is now probing the industry for misleading ads.
The Federal Trade Commission (FTC) revealed that it’s investigating several digital asset firms over deceptive and misleading ads this week. The fresh crackdown comes amid a broad market contagion sparked by the collapse of FTX, Alameda Research, and hundreds of other related entities.
“We are investigating several firms for possible misconduct concerning digital assets,” Juliana Gruenwald Henderson, the FTC spokesperson, told Bloomberg. She, however, declined to reveal the identities of the companies the agency is probing.
“While we can’t comment on current events in the crypto markets or the details of any ongoing investigations, we are investigating several firms for possible misconduct concerning digital assets,” the spokesperson stated, speaking to another outlet.
The FTC is charged with cracking down on fraudulent ads. Under its Truth in Advertising guidelines, it states, “When consumers see or hear an advertisement, whether it’s on the Internet, radio or television, or anywhere else, federal law says that ad must be truthful, not misleading, and, when appropriate, backed by scientific evidence.”
The agency further notes that it has jurisdiction over any ad, whether it appears in a newspaper, magazine, online platforms, on billboards, or any other venue.
FTC’s crackdown on digital currency ads comes amid a spike in ad spending by some of the largest companies in the sector. The collapsed FTX was among the big spenders, contracting celebrities like quarterback Tom Brady, tennis star Naomi Osaka, and comedian Larry David—with David doing a Super Bowl ad that, in retrospect, prophetically predicted the FTX doom.
David, Osaka, Brady, and nine others were recently sued in a class-action lawsuit by investors who lost their money following the FTX collapse.
The lawsuit claimed that while the celebrities disclosed they were doing paid ads, they kept hidden “the nature, scope, and amount of compensation they personally received in exchange for the promotion of the deceptive FTX platform.”
Regulators crack down on misleading ‘crypto’ ads
While the FTC is just starting its digital asset advertising crackdown, the SEC has already filed enforcement against some individuals and companies, the most prominent being socialite and reality TV star Kim Kardashian.
As CoinGeek reported, Kim settled with the SEC for $1.26 million over her unlawful promotion of EthereumMax. The project crashed weeks after Kardashian and other celebrities, including boxer Floyd Mayweather, promoted it to their hundreds of millions of followers on social media.
The crackdown on misleading ads has gone beyond the U.S. In the U.K., the Advertising Standards Authority (ASA) has been going after deceptive digital asset ads since last year. Most recently, it upheld its enforcement action against English football giants Arsenal FC for its “irresponsible fan token ads.” ASA’s order accused Arsenal of taking advantage of its fans’ “inexperience or credulity and trivialised investment in crypto-asset,” warning the football club against advertising its fan tokens again.
ASA has also cracked down on Floki Inu, the meme coin inspired by Shiba Inu, for its London tube ads as well as on Coinfloor and BitMEX exchanges.
In the U.S., the crackdown on the ads could spill to the advertising agencies that have been working with the likes of FTX on these “deceptive ads.”
“Agencies that want to stay in the crypto game are going to realize they need to treat [partners] as [financial products], and obviously deal with all the liability they can,” Timur Yarnall, co-founder, and CEO of tech company Neutronian recently commented.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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