My bad: The YouTube financial influencer network paid to pump FTX

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By Lukas I. Alpert

YouTube finance gurus who had sponsorship deals with FTX have come under fierce criticism online. The gurus say they were duped like everyone else.

Erika Kullberg has been held up as a poster child of a millennial who quit a demanding career to make money as a financial influencer. Shortly after ditching her corporate law gig about three years ago, she started talking about “making $100,000 per year on YouTube.”

As part of her work, Kullberg cofounded Creators Agency, a small talent management firm and digital ad network aimed at helping other “influencers scale their businesses and connect with relevant brands.” One of the brands Creators Agency helped promote was failed crypto exchange FTX.

For the group of popular self-styled YouTube finance gurus Creators Agency represented, the sponsorship deals to promote FTX to their millions of followers were highly lucrative.

Kevin Paffrath, a 30-year-old YouTube star with 1.85 million followers to his real estate and financial tip page Meet Kevin, says he was paid $2,500 every time he mentioned FTX in one of his videos. And he believes he had one of the smaller deals with the crypto exchange; others have claimed six-figure deals with the firm.

“If I could go back in time, I would undo it all in a heartbeat. We failed here,” Paffrath said by phone from a cruise with his family. “Everybody was fooled.”

Paffrath and other prominent finance influencers have posted apology videos and scrubbed their YouTube channels of clips in which they sang the praises of the company and its 30-year-old boy wonder founder, Sam Bankman-Fried. Paffrath says his FTX deal only made up about 3% of his total income in the last year.

Despite the mea culpas, criticism from the online investment community has been scathing , with some pointing to earlier videos in which finance gurus showed off multi-million dollar homes they said they bought, in part, with ad revenue brought in through their YouTube pages.

“The only way to make your apology sincere would be to reveal how much you made from FTX and come up with the best way to give back to your followers,” wrote one poster on a video Paffrath recently posted about FTX. “Don’t apologize while making a joke from a cruise you’re paying for with FTX money.”

FTX filed for chapter 11 bankruptcy protection on Nov. 11, freezing up deposits for hundreds of thousands of customers. The firm has acknowledged that it is under investigation by the Department of Justice, the Securities and Exchange Commission and the Commodities Futures Trading Commission.

While most of the YouTube financial influencers — some with millions of followers — appear to have made no secret of the fact they were taking money from FTX, they encouraged viewers to open accounts on the exchange and, in some cases, received commissions for every customer they sent FTX’s way.

One well-known online finance mentor, Jeremy Lefebvre, who has over 700,000 subscribers to his YouTube page, Financial Education, told viewers he canceled a “multi six-figure deal” with FTX after the firm began coming apart at the seams.

“Everyone believed they were just as legit as anyone, certainly in the crypto industry, but even in the stock industry,” Lefebvre said in a video to his viewers. “When we were looking for a sponsor for one of our channels, guess who outbid everybody? They had that sort of money to throw around.”

Other high profile finance influencers who did business with FTX include Graham Stephan, who has 4.1 million followers to his YouTube pages, and Jaspreet Singh, who has 1.4 million followers of his Minority Mindset page. Both have apologized to their audiences.

Like Paffrath, Stephan and Singh worked with Creators Agency. Kullberg and Creators Agency did not respond to multiple requests for comment. Kullberg’s husband and Creators Agency chief executive, Eric Kullberg, last tweeted before FTX’s collapse, that “[Sam Bankman-Fried] is hands-down one of the best executors not just in the crypto space, but in entrepreneurship generally.”

Messages sent to Lefebrve, Stephan and Singh were not returned.

As federal investigators work to unwind what caused FTX’s demise and whether any crime was committed, legal experts say it is possible that those who actively promoted the business could come under scrutiny.

The Securities and Exchange Commission has aggressively pursued cases under anti-touting laws, levying large fines against celebrities like Kim Kardashian, Floyd Mayweather and Steven Seagal for promoting cryptocurrencies without properly disclosing they had been paid.

The Federal Trade Commission could also look into the matter if it thinks that any deceptive advertising occurred.

YouTube influencers are far from alone in being caught off guard by the meltdown that toppled FTX. The crypto exchange had attracted investment from some of the most sophisticated financiers in the world, including Softbank Group, Sequoia Capital, BlackRock (BLK) and billionaire Chase Coleman’s Tiger Global Management.

“This is a situation where one bad actor has caused billions of dollars in harm and no one knew. Influencers are not the problem,” said Spencer Cornelia, who offers financial advice to some 491,000 followers to his YouTube page.

YouTube finance guru sponsorships were also just the tip of the iceberg for FTX’s advertising and marketing budget. The firm paid millions to NFL great Tom Brady and his supermodel ex-wife Gisele Bundchen, NBA star Stephen Curry and baseball MVP Shohei Ohtani as well as celebrities like Larry David to appear in commercials. Last week, FTX investors filed a class action lawsuit against Brady and many of the other celebrity endorsers of FTX.

The exchange also paid for branding rights for the basketball arena for the Miami Heat and to have their logo appear on umpire uniforms for major league baseball games. The Heat have said they are working to rescind the deal that would have called their stadium the FTX Arena through the 2040 season.

-Lukas I. Alpert

 

(END) Dow Jones Newswires

11-22-22 0031ET

Copyright (c) 2022 Dow Jones & Company, Inc.



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