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Truth in Advertising (TINA.org), a watchdog organization for consumers, has accused 19 celebrities of endorsing nonfungible tokens (NFTs) without disclosing their affiliation with the projects.
On their website, the non-profit organization that promotes consumer rights claimed to have looked into "celebrities that advocate non-fungible tokens (NFTs) on their social media platforms" and discovered that "it is a sector replete with fraud."
Sports icons Floyd Mayweather and Tom Brady, music legends Eminem and Snoop Dog, and a number of actresses, including Gwyneth Paltrow, are among the list of celebrities who have received letters requesting that they immediately disclose any material connections they may have to NFT companies or brands they have promoted. The letters state:
“The promoter often fails to disclose material connection to the endorsed NFT company.”
With many high-profile initiatives sometimes receiving celebrity endorsement and promotion, NFTs are digital certificates kept on the blockchain that prove ownership of a digital or physical item, frequently an artwork.
TINA.org reported that it issued letters to the celebrities implicated on August 8 describing their complaints and warning them of the potentially negative impact hawking NFTs can have on the public, despite the fact that no actual legal sanctions have been applied.
One of the main issues raised by the group in the letters is the lack of disclosure of any potential financial risks related to investing in such speculative digital assets.
TINA.org earlier wrote letters to the legal departments of Justin Bieber and Reese Witherspoon on June 10 regarding the celebrities' promotion of NFTs on social media without disclosing their affiliation with the projects.
On July 1, Bieber's legal team responded, denying any wrongdoing but promising to update the posts.
While Witherspoon's legal team contacted TINA.org on July 20, they asserted that the actress isn't getting anything material from endorsing NFTs.
Shilling could violate FTC guidelines
The aforementioned celebrities might be breaking the Federal Trade Commission's (FTC) guidelines on the use of endorsements and testimonials in advertising and the standards for influencers, according to a blog post on TINA.org's website.
The advocacy group provides a link to the FTC website, which states that influencers are required to disclose any relevant financial relationships with the products they are promoting and to do so in a way that is obvious, unambiguous, noticeable, and integrated into the endorsement.
There hasn't been a widely reported instance of a celebrity being fined for endorsing NFTs or cryptocurrency.
Even said, there are a number of class action lawsuits that are still pending, most notably those against Elon Musk for endorsing Dogecoin and Mark Cuban for endorsing Voyager cryptocurrency items.
A few other famous people, including actor Matt Damon, made headlines when they featured in advertisements for cryptocurrency items. The actor was mercilessly made fun of and derided for his involvement.
Don't listen to celebs: SEC
In a post on their website in 2017, the United States Securities and Exchange Commission (SEC) cautioned investors about initial coin offerings (ICOs) supported by famous people.
Investors should be aware that while celebrity endorsements could seem objective, they could actually be a kind of paid advertising.
"Celebrities who recommend investments frequently lack the knowledge necessary to guarantee that the recommendations are suitable and compliant with federal securities rules."
The SEC claims that celebrities and influencers who use social media to persuade their followers to buy stocks or other investments may be breaking the law if they fail to disclose the type, source, and sum of any direct or indirect remuneration they receive.
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