Celebrity-endorsed NFTs leave some investors ‘financially crippled’

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

Mayweather, a boxing legend, had already served as Tyler’s “biggest inspiration” in his martial arts training. But Tyler was also looking for investment opportunities and figured Mayweather, who often calls himself “Money May,” was worth listening to.

“What I need everybody to do right now: Go get a Bored Bunny NFT,” said Mayweather, dressed in a Louis Vuitton vest with a diamond bracelet, a necklace and a gold watch. “You’re hearing it from the one and only Floyd ‘Make-That-Money’ Mayweather.”

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

Those NFTs are now worth far less than Tyler paid.

“This basically financially crippled me,” said Tyler, who asked to be identified by only his first name because he fears online trolls who ridicule unsuccessful NFT investors. Now, especially with inflation, Tyler said, he is struggling to afford gas for his car and groceries to eat. He said he feels Mayweather and the other promoters “took their payouts and moved on while everybody who scraped by to invest in their futures got robbed.”

The Bored Bunny team promised in its marketing materials that buyers could make “2x, 5x, maybe even 10x the value of [their] investment,” but the value of the NFTs attached to the images nose-dived after a brief spike and has yet to recover. The floor price of a Bored Bunny NFT now sits at 0.05 ethereum (currently $104.09), down from its mint price of 0.4 ethereum (about $1,504.54 at the time).

It’s a pattern that crypto critics, watchdogs and even some influencers point to as an ongoing problem: digital investments riding a wave of NFT enthusiasm and backed by high-profile endorsements that quickly lose value. In some cases, in the crypto world, it’s what’s known as a “rug pull.” But more broadly, ad transparency experts warn, Public figures are promoting NFTs often without having done due diligence or warning their fans about the serious financial risks.

Bored Bunny’s founders, who declined to provide their real names, denied any wrongdoing. Mayweather’s publicist declined to comment.

Droves of celebrities and influencers have leaped at the chance to shill NFTs to their fans. Many of them don’t disclose that they were paid to do so and don’t acknowledge (or, in some cases, they actively downplay) the serious financial risks involved, said Bonnie Patten, the executive director of the consumer advocacy group Truth in Advertising.

“The messaging from these celebrities is like the 21st century equivalent of ‘Let them eat cake,'” Patten said. Mixing the “incredibly volatile” NFT economy and the “Wild West” of influencer marketing, she warned, is a surefire recipe for disaster. “It has the potential to financially wreck vulnerable people who look up to them.”

The multibillion-dollar influencer marketing industry has long been notoriously greedy, with online stars urging their followers to buy potentially dangerous weight-loss products to snake-oil wellness remedies. But the frenzied shilling of NFTs has raised the stakes to such extremes that in place of effective regulation, influencers and some celebrities have started calling out one another’s behavior.

Richard Bengtson, the founder of FaZe Clan, who’s known as FaZe Banks, tweeted screenshots of alleged messages from the Bored Bunny team offering him $500,000 to $750,000 to post about their NFTs. He said he “didn’t make this mistake” because he’d “taken the time to educate myself.”

FaZe Clan didn’t reply to requests for comment. Bored Bunny declined to confirm how much it paid its “commercial partners,” citing a confidentiality agreement.

Bored Bunny said in written direct messages that the team is “actively working on making this project great” but that it is “not responsible for investors not selling” at the optimal time. It said its team had received death threats from angry Bored Bunny buyers, leading it to cut off communication with the community, and that it is developing initiatives “to grow the project to the best of our ability.”

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

“I don’t understand what these influencers are doing. First of all, they’re not disclosing” that they’re being paid, Vaynerchuk said on the podcast “Full Send” during a discussion about NFTs in mid-January. “Any time you promote some s— that you have no f—ing idea what it is, that’s a bad deal.”

The Federal Trade Commission, which handles consumer protection regulations, requires sponsored content to be “honest and not misleading,” to “represent the accurate experience” of the endorser and to “clearly and conspicuously” disclose that it is a paid ad. But the agency doesn’t usually enforce those rules when it comes to individual celebrities and influencers, said Patten, who said the lack of enforcement was largely due to its limited punitive authority and bandwidth in the face of such a pervasive issue. While spokesperson Juliana Gruenwald declined to speak about any specific cases, she confirmed that the agency hasn’t announced any law enforcement decisions related to NFTs.

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

Patten said: “This is all still fairly new. The law hasn’t caught up to the technology.”

The lack of government regulation has also led some independent crypto watchdogs to try to foster transparency in the NFT trading arena, educate consumers and hold bad actors accountable on their own. Among the most prolific is ZachXBT, a self-proclaimed “rug pull survivor”-turned-blockchain “sleuth” who prefers to be identified by his 227,000 followers Twitter alias because of privacy concerns. He regularly publishes crowdfunded investigations exposing alleged cryptocurrency grifters and unscrupulous NFT promoters, including deep-dives into the Bored Bunny fiasco and Mayweather’s history of crypto shilling, which he called “highly irresponsible.”

“It’s insane how much [celebrities and influencers] can make,” he said, adding that novice NFT investors too often put their trust in figures who “don’t have their interests at heart” and are “just preying on their wish to get rich without learning about the industry.”

With few other options, a handful of burned investors have resorted to the courts to try to recoup their losses. Mayweather and Kim Kardashian are being sued for wielding their clout to boost EthereumMax tokens and profit “at the expense of their followers and investors,” according to a class action lawsuit.

Court records don’t identify a lawyer for Mayweather, and his publicist, Kelly Swanson, declined to provide a contact, as well. Mayweather has not filed a response in court. Michael Rhodes, the lead counsel for Kardashian, said he believes the allegations against his client “are without merit” and said, “We will vigorously defend the case.”

Despite losing money, it also doesn’t appear that fans of Mayweather or other celebrities are going to give up on NFTs or crypto.

Tyler Lengyel, 29, a Bored Bunny investor from Texas, spent about $6,000 on Bored Bunny NFTs when the tokens were minted in January. It was around that time that he was leaving his job in sales management for personal reasons. Within weeks, he suddenly had no income, a depleted savings account and NFTs that were nearly worthless. He found temporary work at an Amazon warehouse and then started driving for Uber. This month, while Mayweather flaunted his $42,500 winnings from a different $10,000 boxing bet on Instagram, Lengyel had to sell his car to help cover his bills through July.

“I’ve grown up looking up to some of [the Bored Bunny promoters]. I’ve watched Floyd box. For me, being someone who has followed these people and thinks they’re genuine, it was like: ‘Oh sh–, they’re jumping on this project? Well, I want to get a bunny. I don’t want to miss out on that.’”

Although he is still hurting financially, the experience didn’t turn Lengyel off crypto. He hopes to eventually launch a career in the industry. Mayweather, meanwhile, hasn’t appeared to address the mounting criticism from former fans who hold him at least partly responsible for their financial woes. He has already moved on to marketing his very own NFT, “Mayweverse.”

“Mr. I-Don’t-Lose-At-Nothin’ is back, and if you in the NFT world and you bettin’ on me, you will never lose,” he declares in one video while leading a mini tour through his mansion.

“I’m the money man,” he begins in another video, double fisting stacked wads of $100 bills. “But guess what? Be a part of history, own a part of my legacy, and you can make money, too!”

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