Pop icon Taylor Swift is known for her witty lyrics and chart-topping hits, but she has also demonstrated her due diligence and common sense in spotting a potential scam and legal troubles along the way. In 2021, when the now-bankrupt crypto exchange FTX approached her for a $100 million sponsorship deal, Swift did not simply jump at the opportunity. Instead, she asked a crucial question: “Can you tell me that these are not unregistered securities?” This query was allegedly raised by no other celebrity who was contacted by FTX.
The Importance of Due Diligence as Shown by Taylor Swift
According to Fortune, Swift’s father used to work for Merrill Lynch, so she is no stranger to finance. It was likely her knowledge and experience in the industry that prompted her to ask such a question. Her diligence paid off in the end, as FTX declared bankruptcy last year, and the crypto founder Sam Bankman-Fried was charged with a series of criminal offenses including wire fraud, securities fraud, bank fraud, money laundering, and illegal operation of money transmitting business, among others.
Potential Deal and FTX’s Spending Spree
The potential partnership with FTX would have been one of the biggest deals for the crypto exchange, involving NFT tickets. However, anonymous FTX employees revealed that the deal was too expensive from the beginning, and no one was particularly fond of it.
FTX had been on an advertising spree at the time, partnering with Major League Baseball, a Formula 1 team, and an e-sports team. It also paid to have its name on the Miami Heat’s home arena.
Unregistered Securities
Swift’s question was particularly relevant since securities must be registered with the Securities and Exchange Commission (SEC). The SEC uses the Supreme Court’s Howey Test to determine if an asset is a security. It includes investment contracts that involve “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.” In December, the SEC filed a complaint stating that FTX’s native token, FTT, was a security.
Legal Issues
In November, attorney Adam Moskowitz filed a class action lawsuit against FTX promoters, accusing celebrities such as Tom Brady, Gisele Bündchen, Steph Curry, Shaquille O’Neill, the MLB’s David Ortiz and Shohei Ohtani, and the Golden State Warriors of violating Florida securities and consumer protection laws. The lawsuit also alleged that they were involved in an illegal civil conspiracy.
Moskowitz, along with lawyer David Boies, is trying to recover damages for those who lost money investing with FTX.
Final Thoughts
Taylor Swift’s simple exercise of wit and due diligence helped her avoid a potential scam that led to FTX’s bankruptcy and legal issues. Her knowledge of the finance industry and sharp eye for details allowed her to ask the right questions, and she emerged unscathed in the chaos that followed in the infamous crypto exchange.
This story serves as a reminder that due diligence is crucial in any business transaction and that even the most successful individuals need to exercise caution when it comes to their financial dealings.