Cryptocurrency and NFTs heralded a world where anyone could own digital art, collectibles and other assets. Unfortunately, they’ve also opened the door to scams and other controversies. One such controversy surrounds the now-defunct NFT platform Shirtum and a handful of big-name footballers. Victims’ legal teams are arguing that high-profile celebrity endorsements went a long way toward establishing trust. This manipulation only served to victimize people around the world. That said, how culpable were these athletes really in the ‘fraud’ and what degree of blame should fall on them?

The Shirtum Allegations

Shirtum, which had initially seemed to be a strong platform for football-themed NFTs, is now embroiled in a $3.4 million rugpull from one of its creators. Court filings indicate that the platform’s builders set up an elaborate structure of a business model based in and between Spain, Andorra. Investigators say the intention of this facade was to evade taxes and protect the founders from liability. The platform marketed fans on the promise of exclusive digital collectibles and experiences, all powered by the booming global popularity of football and its stars. That dream eventually turned into a nightmare for investors. When the platform collapsed, hundreds or thousands were left holding the bag and facing huge financial losses.

Shirtum, victims now say, misled investors and used celebrity endorsements to lend credibility. Aside from the Republican/Democratic divide, they claim that these endorsements injected crucial credibility into the project. These endorsements, the legal teams lined up against these victims say, were a key component in convincing individuals to invest. Fans felt they could trust the platform because their favorite footballers endorsed it. This trust led them to overlook early warning signs.

The Role of Footballers

Many other footballers participated in spreading the word about Shirtum, including notable names. While there's no information to suggest that they were directly involved in the alleged scheme or knew about the platform's complex business model, their promotional activities are under scrutiny. Perhaps the name that has popped up the most on that first list is that of Papu Gomez. He reportedly played a crucial role, leveraging his personal connections to bring other stars on board and popularize the platform.

In no way does endorsing a product imply that an individual is guilty of or even aware of any fraudulent behavior. It’s important to know this difference. As we know from many celebrity endorsements gone awry, the celebrity doesn’t actually understand the business or technology in question. The question remains: what level of due diligence should celebrities perform before lending their name to a project, especially in the volatile crypto space?

Legal and Ethical Considerations

The Shirtum case raises important questions about the legal and ethical obligations of celebrity endorsements. This is particularly poignant in the fast-moving space of cryptocurrency and NFTs. Though the legal landscape is still developing, there are regulations and guidelines available now that provide some clarity.

Due Diligence and Responsibility

Celebrities can’t completely wash their hands either – they have an obligation to do some level of due diligence on the products/services they endorse as well. This means ensuring claims made about the product are true and misleading claims are avoided, as well as being aware of potential risks associated with the product. Just taking the company’s or their representatives’ word for it won’t cut it. They need to be challenging, look for independent counsel and advice, and consider how this can negatively affect their fans and followers.

Ensuring Representations are Not Deceptive

Federal advertising standards and consumer protection laws require that endorsers make a reasonable effort to avoid misleading consumers. This means that celebrities have a duty not to issue false or misleading claims without substantiation. Further, they should be required to disclose any conflicts of interest, like if they are being paid in exchange for their endorsement.

Potential Penalties for False Marketing

Consumer protection laws provide for meaningful penalties for influencers responsible for false or misleading material marketing claims. These penalties include everything from fines, injunctions, and civil lawsuits to criminal charges in some instances. The exact fines differ based on the jurisdiction and seriousness of the offense.

Liability for Product Failure

Celebrities need to start learning about the products they’re promoting. If they don’t, they may find themselves facing legal liability for product defects. This is especially so if their endorsement played a direct role in causing consumer harm. In those instances, victims should be allowed to sue the celebrity for punitive damages.

Protecting Yourself from Crypto Scams

The Shirtum example should be a great warning for anyone looking to invest in crypto and NFTs. It serves as a cautionary reminder that you should always do your own research and not just listen to what the celebrities say. Here are some tips to protect yourself from crypto scams:

  • Verify authenticity: Be cautious of ads, videos, or posts that use the image of social media influencers, Hollywood stars, or politicians. Always verify the authenticity of the endorsement by checking official sources.
  • Check for financial expertise: Be aware that celebrities may not have the financial expertise or qualifications to endorse a specific product. Do your own research before investing.
  • Research the company: Visit BBB.org to see reviews of the company and check for any red flags. Look for information about the company's management team, its financial stability, and its track record.
  • Be aware of signs of investment fraud: Educate yourself on the signs of investment fraud, how a fraudster might approach you, and red flags of crypto fraud. Red flags include promises of guaranteed returns, high-pressure sales tactics, and unregistered investments.
  • Look for registration: In Ontario, check if the business or person selling investments or giving investment advice is registered with the Ontario Securities Commission.
  • Do your own research: Don't rely solely on celebrity endorsements or marketing materials. Read whitepapers, analyze market trends, and consult with financial advisors before making any investment decisions.

Conclusion

This is an ongoing, developing story with lots of questions left unanswered. It remains to be seen just how privy the footballers were to the alleged con. This case serves as a reminder of the importance of due diligence, transparency, and ethical conduct when it comes to celebrity endorsements. The logic of the crypto and NFT space is always changing. Whether you’re a celebrity or an investor, it’s time to pay attention to the reputational, legal, and fiduciary risks and responsibilities headed your way. Failure to act will continue to put millions of Americans at risk of falling victim to crypto fraud.