Cristiano Ronaldo overturned tragically after getting involved in Web3, and the 7 billion lawsuit compensation will hollow out his 10-year income?

For a long time, from virtual currency to NFT, in order to maintain the popularity of the project and the liquidity of assets, mainstream virtual asset service providers (hereinafter referred to as “VASPs”) have not only added various new ways to the project and increased the value of virtual currency or NFT, but also used some special external marketing methods to help their projects not only retain the elderly, but also attract new people through multiple channels. Among them, paid promotion is a common means used by VASPs.

Of course, paid promotion is not the original of the virtual asset circle, as early as the early stage of the development of the human market economy, “advertising” as an early means of paid promotion has appeared, and today, the mode of paid promotion has developed a variety of new forms with the activity of human business activities, and the emerging social media paid promotion has become the mainstream. However, due to the tightening of the regulation of virtual assets in various countries, such paid promotions have different legal risks for platform celebrities, promotion platforms and VASPs.

Sister Sa’s team noticed that the front foot of a certain An had just suffered a penalty crisis and chose to settle at a sky-high price, and the back foot football superstar Ronaldo was subject to a class action lawsuit because of a certain An platform, with a claim amount of more than $1 billion, if the court supports the plaintiff’s request, Ronaldo may lose most of his income in the past 10 years. Today, Sister Sa’s team will start from the case of Ronaldo being sued, and explain in detail the legal risks of celebrity platforms to promote virtual assets.

01, paid promotion of virtual assets, a disguised celebrity “killer”?

Following celebrities such as Curry, Larry David, Kardashian, and Naomi Osaka, Ronaldo has also fallen into the “pit” of paying to promote virtual assets. Recently, Cristiano Ronaldo was subjected to a class action lawsuit due to his long-term close cooperation with a certain security company and the promotion of virtual assets for a certain security platform, and was required to pay at least 1 billion US dollars in compensation (probably more than 7 billion yuan at the exchange rate on the date of publication). If the judge “decides as requested” in this case, it will not only make most of Ronaldo’s income in the past 10 years “for nothing”, but also create another milestone case in the history of virtual assets - the celebrity who has been claimed the highest amount of money in history for paying to promote virtual assets.

A few days ago, the three plaintiffs filed a class action lawsuit of more than $1 billion in the Southern District Court of Florida against Cristiano Ronaldo, F1, Mercedes-Benz, Major League Baseball and other well-known individuals and legal entities. In the complaint, several plaintiffs alleged that Cristiano Ronaldo and other celebrities and organizations with high social visibility and influence had led them to make huge and unsafe investments, and that the relevant acts were suspected of “deception” and violated a number of U.S. laws on the promotion of financial products. The lawsuit also pointed the finger at Ronaldo himself: there is evidence that the success of the fraudulent act of issuing and selling unregistered securities is directly related to Ronaldo’s help.

So, as a celebrity who has been active in the virtual asset circle for a long time and made a lot of money when NFT was on fire, did Ronaldo really help Mou’an promote virtual assets? What specific help was provided? The plaintiff argued in the complaint that Ronaldo’s cooperation with Mou’an was “very successful”, and before last year’s World Cup, Ronaldo cooperated with Mou’an to launch his first personal NFT project “CR7”, which was priced from $77 to $10,000. After the official announcement of Ronaldo’s NFT project, the number of online searches on the Internet with “Mou’an” as the keyword increased by 500%. At the same time, Ronaldo’s high-priced NFT was also sold out in the first week of release.

And now, Sister Sa’s team inquired about the third-party NFT trading platform and found that Ronaldo’s NFT project has lost most of its liquidity, and the transaction price has plummeted, and the cheapest one can be bought for only a few dollars. It can be seen that the plaintiff’s claim is not vexatious, if everyone did buy such a high-risk investment product with real money under Ronaldo’s strong fan appeal, then today’s investment losses must be inseparable from Ronaldo, and there is a certain reason for asking him for compensation.

02, will Ronaldo really lose 1 billion?

**Let’s talk about the answer first, Sister Sa’s team believes that the amount of compensation is likely to be greatly reduced. **

Although the case has not finally entered the trial judgment, and the judge has not made a determination on the legal nature of virtual assets such as virtual currency, according to the settlement conditions of the two parties, the SEC seems to have won the case. In other words, in the current judicial environment in the United States, virtual assets are more likely to be recognized as securities or securities-like financial products.

On the basis of its determination that virtual assets are securities or quasi-securities financial products and that an is an issuer of virtual assets, the SEC determined that the two most important “crimes” of a security company are: (1) providing and selling crypto-asset securities Tronix (i.e., TRX coin) and BitTorrent (BTT) to the public without compliance registration;( and 2) defrauding and manipulating the cryptocurrency secondary market through a large number of wash trading.

Therefore, before considering whether and how much Ronaldo should pay, we must be clear: whether Ronaldo is the issuer of the virtual asset, and whether he has the obligation to disclose relevant information?

It has to be said that most of the time, when VASPs issue virtual assets with the theme or gimmick of the personal IP of living celebrities, they will deliberately blur the issuer’s issues in marketing and publicity, and the common promotional copy is “This platform cooperates with Mr. A to issue xx projects” and “The company and Miss B jointly created xx projects”, but in fact, VASPs are likely to just sign an endorsement or authorization contract with Mr. A and Miss B’s brokerage company, and use the celebrity effect to “contribute” to their NFT projects. In this case, the issuer of the virtual asset is only VASP, and Mr. A and Ms. B are the advertising spokespersons.

In other words, VASPs, as issuers and sellers of virtual assets, are the entities that bear the compliance obligations of financial institutions such as information disclosure obligations in the true legal sense. It is true that investors are likely to have made high-risk investments under Ronaldo’s call, but the real reason for consumer losses is that an illegal issuance of unregistered securities products, illegal manipulation of the securities market and non-performance of statutory information disclosure obligations, so Ronaldo is not the main person responsible for consumer losses.

In addition, Sister Sa’s team would like to remind everyone that whether it is the lack of liquidity of Ronaldo’s NFT project or the price of other virtual assets issued by Mou’an, it cannot all be “blamed” on Ronaldo himself or the issuer Mou’an in law. Judging from the jurisprudence of securities dispute cases, judges must also take into account the impact of “systemic risk” on investors’ losses when determining the amount of compensation, such as the sharp fluctuations in the virtual asset market itself and the negative impact of global economic instability on the virtual asset industry.

All things considered, even if Ronaldo loses the lawsuit after a long lawsuit, the amount of compensation will most likely be greatly reduced, and the subsequent liability will even be further “diluted” due to the large number of co-defendants.

03、What are the legal risks that may be faced in the paid promotion of virtual assets in China?

After talking about Ronaldo’s lawsuit, we should also consider whether celebrities will face sky-high claims if they pay to promote virtual asset platforms in China?

Many partners believe that since the issuance of the “Notice on Further Preventing and Dealing with the Risk of Speculation in Virtual Currency Transactions” and the “Notice on Rectifying Virtual Currency “Mining” Activities”, all virtual currency-related institutions and businesses have withdrawn from the mainland Chinese market, and there is a high probability that the fine for paying to promote virtual assets will not happen. In fact, this is not the case, the concept of virtual assets is relatively broad, in addition to virtual currency, NFT and other derivative products, and even virtual currencies and equipment on platforms such as games are different from virtual assets based on blockchain technology in terms of legal nature, but celebrities may still have serious legal risks when accepting such paid promotions.

Article 56 of the Advertising Law of the People’s Republic of China stipulates that if a false advertisement of goods or services related to the life and health of consumers causes harm to consumers, the advertising spokesperson shall be jointly and severally liable with the advertiser;

Under normal circumstances, virtual assets are not goods or services related to life and health, so when the virtual assets issued by VASP cause losses to investors, the spokesperson will basically not be liable for joint and several damages without fault due to the endorsement behavior, but if the spokesperson is subjectively at fault (knowing or should have known that there is a problem with the virtual assets issued by VASP), the spokesperson will be jointly and severally liable for damages with the VASP (advertiser), advertising agent, and advertisement publisher. **

In judicial practice, China’s current criteria for judging the existence of problems in products that celebrities “know or should know” are relatively relaxed. In April 2016, the “Zhongjin Department” investment and wealth management products exploded, tens of thousands of investors suffered heavy losses, after the case, many investors pointed the finger at the “Zhongjin Department” advertising spokesperson Pan Moumou (a famous snooker player, the room is called “Nine Ball Queen”) and filed a lawsuit against Pan Moumou, in the judgment of the case [(2020) Hu 02 Min Zhong No. 3552 Judgment], the judge made it clear: " When assessing Pan XX’s fault, the duty of care of ordinary people should be used as the standard for measuring the duty of prudent review, and the obligation of review should not be reversed based on the outcome of a criminal case after the fact. Just like a large number of fundraising participants who are victims, if Pan Moumou has fulfilled the review obligation of ordinary people and reviewed the situation of the advertiser, he should not be subject to a higher review obligation. ”

However, Sister Sa’s team reminded that the standard for determining the fault of celebrity paid promotion in civil compensation is different from that of administrative penalties, and celebrities may avoid consumer claims, but they still have to be strictly supervised by market regulators. On May 28, 2022, the well-known actress Jing was identified by the Guangzhou Tianhe District Market Supervision Bureau as an endorsement in violation of the “Advertising Law” because of her endorsement of a fruit and vegetable food suspected of false advertising, and a total of 7.2212 million yuan was confiscated.

04, written at the end

As mentioned earlier, Ronaldo may not lose all his money as a result of this lawsuit, but he may not escape the punishment of the US market regulatory authority. The U.S. Federal Trade Commission Act has made it mandatory for online paid promotions to make explicit disclosures in promotional tweets. The level of disclosure needs to be up to the level of how much money has been collected.

In the administrative penalty case of paid promotion of virtual assets, American socialite Kim Kardashian (Kim Kardashian) is a typical case: Kardashian cooperated with a VASP to promote a cryptocurrency on social platforms, and was fined $1.26 million. At the time, Kardashian had clearly labeled the promotion as an advertisement in her tweet, but did not disclose that it received $250,000 in promotion fees. Cristiano Ronaldo is also likely to face penalties from regulators for the same reasons. In short, Sister Sa’s team reminds that there are many pits in the paid promotion of virtual assets, and celebrities need to be more cautious to participate.