Jack Dorsey, the founder of Twitter (now X), sold his first tweet as a non-fungible token for $2.9mn (£2.3mn) in March 2021.
By April 2022, that same NFT was sold for less than $300. At the end of 2021, the NFT market had a value of $41bn. Today, most of them are worthless. Those who suffered the most financial losses may seek redress wherever they can — while footballer Cristiano Ronaldo is currently being sued for $1bn for promoting NFTs on his Instagram page.
How did we get here and what is the future for celebrity endorsements in the risky world of crypto investments?
It seems almost self-evident that Matt Damon, Kim Kardashian and Larry David are not the best people to offer crypto finance advice. Fortunately, regulators have attempted to ensure celebrity promotions are as transparent as possible to assist consumers in their due diligence.
In the US, the Securities and Exchange Commission requires celebrities to disclose the nature, scope and amount of compensation they receive in exchange for their endorsement. This is known as the SEC’s federal “anti-touting” law, the purpose of which is to disclose to the public whether the promotion of a security may be biased.
Selling unregistered securities is illegal
Further, albeit subject to limited exceptions, the Securities Exchange Acts of 1933 and 1934 render it illegal to sell unregistered securities.
However, not every A-lister has diligently complied with these regulations. In November 2022, Ronaldo and Binance (the world’s largest digital asset trading platform) entered into a multiyear partnership selling the footballer’s exclusive NFT collection.
An international media campaign was launched to promote their partnership, with Ronaldo utilising his substantial Instagram following in particular.
The collection featured the sale of 8,638 “premium” NFTs portraying momentous events from Ronaldo’s life. The NFTs were split between four rarity levels — the “super rare” being a statute of the footballer performing “his epic bicycle kick” of which only seven were created.
The collection sold out within a week, and following this success a second collection — Forever CR7: the GOAT — was dropped in July 2023. This time it featured circa 29,000 NFTs that celebrated Ronaldo’s (then) 838 career goals, with the opportunity to win limited edition signed Binance merchandise.
Then, in October 2023, a third and final collection was dropped — CR7 Forever Zone. This time Ronaldo offered holders the opportunity to win a training session with him. As with the first, these additional collections were vigorously promoted online.
Unbeknown to the public at the time, Binance was being investigated by the SEC for multiple alleged breaches of federal law. In June 2023, 13 charges were filed against the platform — notably for the unregistered sales of securities, including BNB (Binance’s crypto currency) and BUSD (a stablecoin), in the form of tokens. In November 2023, Binance agreed to pay $4.3bn in penalties, and its then chief executive Changpeng Zhao stepped down.
