Numerous cryptocurrency investors in the US and throughout the world suffered greatly as a result of FTX's demise.
People won't be able to get all of their money back, and neither the timeframe nor the amount are currently known. Everything relies on what transpires in the bankruptcy courts and how much cash the new leadership is able to recoup.
According to the attorney conducting a class action lawsuit involving many FTX the promoters, Taylor Swift dodged signing a $100 m marketing agreement for FTX claiming she was considered the only well-known person to express doubts about the cryptocurrency exchange.
FTX's celebrity endorsers, including Shaquille O'Neal, Tom Brady, and Larry David, are being sued for nearly $5 billion, according to Adam Moskowitz, who discussed the case on the "The Scoop" podcast.
The attorney claimed that celebrities failed to do due diligence to determine whether FTX was in violation of the law. "The one person I found that did that was Taylor Swift," Moskowitz said to Frank Chaparro of The Scoop, adding that Swift backed out of the agreement and never publicized the now-bankrupt trade.
A few entrepreneurs are taking a different course of action. Celebrities who supported FTX and other cryptocurrency companies are being sued. For instance, the Moskowitz Law Firm is suing FTX promoters Larry David, Shaquille O'Neal, Tom Brady, and Kevin O'Leary for $5 billion. Adam Moskowitz said on the The Scoop podcast, "We're going after the influencers, we're going after the brand ambassadors, as well as course, we'll go after anything that's left."
Additionally, he claimed that Taylor Swift had been one among the handful superstars and she declined a FTX structure after questioning it. Why? She was worried that FTX was offering securities that were not registered.
Are cryptocurrencies unregistered securities?
The question of whether or not cryptocurrencies may be considered securities has plagued the market for years. It important because there are tight regulations governing the management of securities, notably how they can be exchanged and the manner in which data can be shared. When something is a security, it must be licensed by the Securities and Exchange Commission, or SEC, & only be traded by registered stockbrokers. Many of the most popular crypto exchanges lack security broker licenses.
Many cryptocurrencies have been designated as commodities, which means that the Commodity Futures Trading Commission (CFTC) has jurisdiction over them. However, the SEC contends that many cryptocurrency items are actually unregistered securities. The identical thing is argued by the attorneys that want to sue FTX as its ambassadors.
The Howey test, which the Securities and Exchange Commission employs, says that if people spend money in a joint company with a reasonable expectation that profits would result from others' efforts, it qualifies as a "investment contract." A form of protection is an investment contract, and it's unclear if many cryptocurrencies fit all four criteria.
Even though that was already a lot to take in, the New York Attorney General (NYAG) chimed in early this year. In response to KuCoin's trading of unregistered securities, it filed a lawsuit. It claims in its lawsuit that Ethereum (ETH), the second-largest cryptocurrency, is a security. The cryptocurrency sector laments a lack of regulatory certainty in the meanwhile. A lot depends on how instances, like the SEC's continuing litigation against Ripple (XRP), play out in courts in spite of clear directions from Washington.
What investors can learn from Taylor Swift’s question
Cryptocurrency is a young and uncontrolled sector. If you're thinking about buying cryptocurrency, Taylor Swift's inquiry is crucial. If regulators determine that leading cryptocurrencies such as Ethereum are securities, those projects must adhere to SEC regulations.
Increased regulation, in whatever form it takes, might be advantageous to the crypto business in the long run. It may foster much-needed trust and provide greater transparency into what crypto platforms do with your money. It has the potential to minimize instances of market manipulation and insider trading. However, this could choke projects in their early stages and make it difficult for regular investors to acquire and sell specific coins and tokens.
As an investor, you must grasp the discussion and keep track of the numerous court cases. The Moskowitz case, for example, implies that if digital currencies represent securities, buyers may be able to recoup capital invested following the FTX crash. However, the outcome might have a huge influence on pricing and disrupt the way the crypto business operates in the United States.
In conclusion
Among the numerous hazards associated with crypto investment is the lack of investor protection that comes with a murky regulatory framework. Others include extreme volatility, uncertainty about how the technology will evolve, and the possibility of market manipulation. If you own cryptocurrency, be aware of the hazards. Only invest money you can afford to lose, and keep cryptocurrency to a tiny fraction of your overall portfolio.
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