Celebrity-endorsed NFTs leave some investors ‘financially crippled’

When Floyd Mayweather started promoting the obscure NFT project on Twitter this year, Tyler jumped at the investment opportunity.

Mayweather, the boxing legend, has already served as Tyler’s “biggest inspiration” in his martial arts training. But Tyler was also looking for investment opportunities and decided that Mayweather, who often refers to himself as “Money May”, was worth a listen.

“What I need everyone to do right now: Buy a Bored Bunny NFT,” said Mayweather, wearing a Louis Vuitton vest with a diamond bracelet, necklace and gold watch. “You hear it from the one and only Floyd Mayweather who makes money.”

Tyler, 35, a real estate manager whose family runs a small Miami-based transportation company, said he raised about $12,000 with the help of his mother and bought non-fungible tokens, or NFTs, digital tokens that transfer ownership of digital images. In this case, the project was a series of images of rabbits, similar in nature to the popular images of the Bored Ape Yacht Club, which fueled a boom in NFT art projects.

These NFTs are now worth a lot less than what Tyler paid.

“It basically blew me away financially,” said Tyler, who asked to be called by his first name only because he fears online trolls, who are ridiculously unlucky at NFT investors. Tyler said that now, especially with inflation, he is struggling to afford gas for his car and groceries for food. He said he believed Mayweather and other promoters “got their payouts and left, while everyone who was stingy to invest in their future was robbed.”

The Bored Bunny team promised in their marketing materials that customers will be able to get “2, 5, or even 10 times more than [their] investments”, but the value of the NFTs attached to the images plummeted after a short spike and has yet to recover. The minimum price of Bored Bunny NFT is now 0.05 Ethereum. (currently $104.09), compared to its mint price of 0.4 Ethereum. (about $1504.54 at the time).

Cryptocurrency critics, observers, and even some influencers point to this model as an ongoing problem: digital investments driven by NFT enthusiasm and backed by high-profile endorsements that quickly lose value. In some cases, this is known as “pulling the rug” in the crypto world. But more broadly, ad transparency experts warn, public figures often promote NFTs without doing their due diligence and warning their fans of the serious financial risks.

The founders of Bored Bunny, who declined to give their real names, deny any wrongdoing. Mayweather’s publicist declined to comment.

A host of celebrities and influencers have jumped at the opportunity to indoctrinate the NFT into their fans. Many of them do not disclose that they were paid for it and do not acknowledge (or, in some cases, actively downplay) the serious financial risks involved, says Bonnie Patten, executive director of consumer advocacy group Truth in. Advertising.

“The message of these celebrities is like the 21st century equivalent of ‘Let them eat cake,'” Patten said. She warned that mixing the “incredibly volatile” NFT economy with the “wild west” influencer marketing is a recipe for disaster. “This can lead to financial ruin for vulnerable people who look up to them.”

The multi-billion dollar influencer marketing industry has long been known for its greed, with online stars urging their followers to buy potentially dangerous weight loss products rather than snake oil health products. But the NFT’s frantic shilling has raised the stakes to such an extreme that instead of effective regulation, influencers and some celebrities have begun to condemn each other’s behavior.

Richard Bengtson, founder of FaZe Clan, known as FaZe Banks, screenshots on twitter alleged messages from the Bored Bunny team offering him between $500,000 and $750,000 to publish about their NFTs. He said he “didn’t make that mistake” because he “wasted time educating himself”.

FaZe Clan did not respond to requests for comment. Bored Bunny declined to confirm how much he paid his “commercial partners”, citing a confidentiality agreement.

Bored Bunny’s written communications state that the team is “actively working to make this project great” but “takes no responsibility for investors not selling” at the optimum time. He said that his team has received death threats from angry Bored Bunny customers, which has resulted in the termination of communication with the community, and that he is developing initiatives “to develop the project to the best of our ability.”

Other influencers, such as entrepreneur Gary “Wee” Vaynerchuk, have specifically drawn attention to the trend of public figures advertising NFTs, despite having little understanding of how they work or the risks buyers face.

“I don’t understand what these influencers are doing. First, they don’t disclose” what they’re being paid, Vaynerchuk said on the Full Dispatch podcast during an NFT discussion in mid-January. “Any time you promote some shit that you have no fucking idea what it is, it’s a bad deal.”

The Federal Trade Commission, which regulates consumer protection, requires sponsored content to be “honest and not misleading”, “reflect the accurate experience” of the endorser, and “clearly and conspicuously” disclose that it is paid advertising. But the agency doesn’t usually enforce those rules when it comes to individual celebrities and influencers, said Patten, who said the lack of compliance is largely due to its limited punitive powers and bandwidth in the face of such pervasiveness. problem. Although a spokeswoman for Juliana Grunwald declined to talk about any specific cases, she confirmed that the agency has not announced any NFT-related law enforcement decisions.

The Securities and Exchange Commission, which oversees investor protection, has yet to offer public guidance on whether NFTs are considered securities; SEC spokeswoman Aisha Johnson also declined to comment. As securities, NFTs will be subject to the same promotion rules as stocks, for which sponsored endorsements must disclose “the nature, source, and amount of any compensation paid.”

Patten said: “It’s still pretty new. The law has not kept pace with technology.”

The lack of government regulation has also prompted some independent cryptocurrency watchdogs to try to increase transparency in the NFT trading arena, educate consumers, and prosecute attackers on their own. Among the most prolific ZachXBT, a self-proclaimed “mat pull survivor” turned blockchain “sleuth” who prefers to be identified by his Nickname on Twitter with 227,000 followers for privacy reasons. It regularly posts crowdfunding investigations exposing alleged cryptocurrency scammers and unscrupulous NFT promoters, including details on The bored rabbit fiasco and Mayweather’s history with the crypto shilling, which he called “extremely irresponsible”.

“It’s crazy how [celebrities and influencers] can make money,” he said, adding that aspiring NFT investors all too often trust numbers that “don’t have their own interests at heart” and “are just cashing in on their desire to get rich without knowing about the industry.”

With no other options, a handful of bankrupt investors went to court to try to recover their losses. According to the class action lawsuit, Mayweather and Kim Kardashian are being sued for using their influence to raise EthereumMax tokens and profit “at the expense of their followers and investors.”

Court records do not list Mayweather’s attorney, and his publicist Kelly Swanson declined to provide contact information. Mayweather did not file a response to the court. Michael Rhodes, Kardashian’s lead attorney, said he considered the allegations against his client “unfounded” and said, “We will vigorously defend the case.”

Despite the loss of money, it looks like fans of Mayweather or other celebrities are not going to give up on NFTs or cryptocurrencies.

Tyler Lengyel, 29, a Texas-based Bored Bunny investor, spent about $6,000 on the Bored Bunny NFT when the tokens were minted in January. Around the same time, he left his job in sales management for personal reasons. Within weeks, he suddenly had no income, a depleted savings account, and nearly worthless NFTs. He found a temporary job at an Amazon warehouse and then started working as a driver for Uber. This month, while Mayweather was showing off his $42,500 win in another $10,000 boxing tournament, made a bet on Instagram, Lengyel had to sell his car to cover his bills until July.

“I grew up looking at some of the [the Bored Bunny promoters]. I watched Floyd box. For me, as someone who followed these people and thought they were real, it was like, “Oh shit, are they jumping on this project? Well, I want to get a rabbit. I don’t want to miss it.”

Although he still suffers financially, the experience did not make Lengyel give up on cryptocurrencies. He hopes to eventually start a career in the industry. Mayweather, meanwhile, has not responded to growing criticism from former fans who hold him at least partially responsible for their financial problems. He has already moved on to marketing his own “Mayweverse” NFT.

“Mr. I-Won’t-Loss-Nothing-Nothing is back and if you’re in the NFT world and betting on me, you’ll never lose,” he states in one video taking a mini-tour of his mansion.

“I’m a money man,” he begins in Another video, clenching stacks of 100 dollar bills with a double fist. “But you know what? Become a part of history, own a part of my legacy, and you too can earn money!”

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